Reserve Bank of India Cautions Users of Virtual Currencies Against Risks [pdf]

Banks are not invulnerable to hacking.

If you get hustled for your pocket money in the street then the police will have to find the perpetrator with any means at hand. Just because it's an electronic currency does not mean anything is different here.

Are they trying to say that every single Indian citizen could withdraw their money as gold or some equally valuable substance that they can equate to cash money in society?

Wealth truly knows no god and no master, nor any border.

Beware of the propaganda, fear what you don't understand.

This incompatibility shows up with Coinbase, where they require a bank account number and a credit card number and identity verification to buy Bitcoin instantly because they're bridging the gap and have no recourse if someone scams them. Not exactly peer-to-peer or anonymous.

Payment companies like credit card issuers or Paypal do a lot of policing of shady vendors and shady customers. If you're just using cash then it's buyer beware. But on the other hand, it allows you to make a payment when a bank wouldn't allow it.

India has a chronic problem of tax evasion, in the grand schemes of things only a handful of their citizens can claim a defense/offense of "it's ability to tax foreign income of resident Indians", since only a handful do not have the ability to evade taxes or have never deliberately evaded taxes.

A quick search for "tax evasion in India" can educate on this topic, including an article[0] that states "tax evasion is India's national sport."

My Indian friends tell me, that they don't feel bad evading taxes a little since the politicians, bureaucrats etc would squander it through bribes and scandals. To which I say, perhaps the main reason for rampant scams and bribery is that taxes are evaded and these public employees are paid poorly.

[0] http://www.businessweek.com/magazine/in-india-tax-evasion-is...

edit:

On re-reading my comment I realized that I was unclear why in it's current scope RBI's main concern is not the scope of tax evasion. Currently India looses over $300B to tax evasion each year, even if all of bitcoin's market cap was taxable by India this would be a very small fraction of their tax losses.

I believe the real reason lies in addressing customer grievances. India is plagued by numerous scandals and scams in the private sector and the only resort for most people is going to the consumer courts if they can afford it. Their already few options would be obliterated if they choose to deal with bitcoin.

While this may be a concern in the developed countries, its not nearly as bad as the situation in India and similar economies.