Gujarat Global News Network, New Delhi
The Ministry of Finance has cautioned people against investing in virtual currencies and compared them to ponzi schemes.
“There has been a phenomenal increase in recent times in the price of Virtual ‘Currencies’ (VCs) including bitcoin, in India and globally. The VCs don’t have any intrinsic value and are not backed by any kind of assets. The price of bitcoin and other VCs, therefore, is entirely a matter of mere speculation resulting in spurt and volatility in their price.”
There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money.” “Virtual currencies are not backed by Government fiat. These are also not legal tender. Hence, (they) are not currencies. These are also being described as Coins. There is however no physical attribute to these coins. Therefore, Virtual Currencies are neither currencies nor coins. The Government or Reserve Bank of India has not authorised any VCs as a medium of exchange,” states the government note.
The Indian government warning comes a day after regulators in South Korea too sounded similar warnings about Bitcoins.
In the recent weeks, despite all the uncertainties and lack of transparency around Bitcoin, its value has gone significantly. Although surging to the rate of over $19000 per Bitcoin, the rate in the last several days has crashed down to around $14000.
The finance ministry also emphasised “the risk of the investment bubble in VCs of the type seen in ponzi schemes in which a sudden crash can mean that the investors lose all their hard-earned money.”
Since VCs are stored in a digital format, they are also vulnerable to malware and ransomware attacks, the ministry added. “The encryption in VCs like bitcoin ensures anonymity which might boost illegal activities like terror funding, smuggling being carried out online.”
The statement issued by the ministry stated that “RBI has also clarified that it has not given any licence/ authorization to any entity/ company to operate such schemes or deal with bitcoin or any virtual currency. The Government also makes it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants, therefore, deal with these VCs entirely at their risk and should best avoid participating therein.”
Further, the Securities and Exchange Board of India (SEBI) intends to crack down on schemes such as so-called initial coin offerings that take advantage of investors who have little understanding of the risks of investing in such cryptocurrency ventures and those who are running outright fraudulent operations.
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