The Reserve Bank of India (RBI) has highlighted the potential risks of digital currencies such as bitcoin.

According to the central bank, virtual currencies pose “black money” risks are "susceptible to misuse" by terrorists and illegal entities for money laundering purposes. It clarified that it has not given any license and authorization to any entity or company involved in virtual currency related schemes, The Times of India reported.

The comments were made by the RBI to a parliamentary standing committee on finance. Earlier this year, a governmental panel, comprising of representatives from the Finance Ministry, NITI Aayog, Ministry of Information Technology, State Bank of India, and the Reserve Bank of India (RBI), was formed to evaluate the existing international framework on digital currencies and suggest anti-money laundering and consumer protection measures best suited for the country.

The RBI has always maintained a cautionary approach towards digital currencies. In February, it issued a notice to the users of virtual currencies in the country, urging them to exercise high caution when engaging in digital currency-related activities.

The central bank told the parliamentary committee that any user, holder, investor, trader, or others dealing with virtual currencies will be doing so at their own risk.

"It is true that while virtual currencies may have legitimate uses, some of their characteristics like anonymity make them susceptible to misuse or abuse," the RBI said, adding that criminals and terrorists can leverage this opaqueness for laundering money or for darknet transactions.

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