Expressing concern over the growing acceptance of virtual currencies, RBI Deputy Governor R. Gandhi on Wednesday said these pose potential financial, legal, customer protection and security-related risks.

"We can see that in these types of virtual currencies, there is no central bank or monetary authority. They pose potential financial, operational, legal, customer protection and security-related risks," Gandhi said at a Fin Tech conference here organised by industry chamber Ficci, Indian Banks' Association and IT industry body Nasscom.

"No established framework for recourse to customer problem, disputes and grievances is feasible with this kind (virtual currency) of framework. 

"My arguments against these virtual currencies stem from two elements, namely, the concept of confidence and anonymity. The currency should be able to sustain these two elements forever. It will impair its exalted status once either of these two elements gets affected," he added. 

The Deputy Governor said virtual currencies are stored in digital electronic form and are prone to losses arising out of hacking, loss of passwords and malware attacks, adding that a number of cases had been reported where virtual currencies were used for illicit and illegal activities.

Gandhi also said the confidence in Bitcoin, or any other virtual currency based on blockchain, is also limited to its initial rounds and circles.

"The initial round is always filled with adventurists and risk seekers. The moment masses gets in, the risk avoiders get in, they will need greater confidence for its acceptance and continuance, and that can come only if an authority issues it," he said.

"It may remain a pipe dream that blockchain will eliminate currency by ushering in virtual currency. It is unlikely." he added. 

On the subject of peer-to-peer lending, Gandhi said the Reserve Bank would soon release the final norms in this regard.

"We have received comments and soon we will be able to finalise it (norms)," he said.

Peer-to-peer lending is a form of crowd-funding via an online platform that matches lenders with borrowers in order to provide unsecured loans.