Key Highlights: 

  • FinMin asked consumers to be alert to avoid getting trapped in such Ponzi schemes 
  • Government or RBI has not authorised any VCs as a medium of exchange
  • Government also makes it clear that Virtual Currencies are not legal tender 

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The government on Friday cautioned people against risks of investing in virtual currencies (VCs) terming the latter as ponzi schemes. 

Issuing a statement today, the Ministry of Finance said, “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 prices."

The Ministry cautioned people against the risk stating, "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." 

It asked consumers to be alert and extremely cautious to avoid getting trapped in such Ponzi schemes. 

"VCs are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money. As transactions of VCs are encrypted they are also likely being used to carry out illegal/subversive activities, such as, terror-funding, smuggling, drug trafficking and other money-laundering Acts," the statement said.

Slump in Bitcoin raises eyebrows on cryptocurrencies’ performance in 2018

Also Read: How to transact on Bitcoin in India