India’s finance ministry has cautioned citizens against investing in virtual currencies like bitcoin, likening them to ponzi schemes, claiming they lack intrinsic value and aren’t backed by assets. In its public warning given on 29 December, the government claimed that it was ‘mere speculation’ that was driving prices of bitcoin and other virtual currencies.
The government’s statement reads that there is a real and heightened risk of investors “losing their hard-earned money”. The government statement also asked consumers to be alert and cautious about getting “trapped in such Ponzi schemes”.
Cryptocurrencies aren’t backed by government fiat money and aren’t considered legal tender, the finance ministry added, adding that their transactions are encrypted and are therefore ‘likely’ being used for illegal activities such as ‘terror-funding, smuggling, drug trafficking and other money-laundering acts’.
The ministry also pointed to three separate cautions by India’s central bank in late 2013, February 2017 and December 2017 voicing similar warnings.
India’s bitcoin industry remains unregulated by the government despite moves to research and develop a regulatory framework for cryptocurrencies in India. Last month, India’s Supreme Court asked the government to develop a framework to “regulate the flow of Bitcoin” in the country.