The ministry of finance cautioned people against the risks of investing in virtual currencies such as bitcoin which lack government fiat, comparing them with Ponzi schemes.
This follows a crackdown by the South Korean government on trading of bitcoins which led to an 8% drop in its value on Thursday.
“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. Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes.”
The Reserve Bank of India (RBI) has issued three warnings against investments in cryptocurrencies — one each in December 2013, February 2017 and earlier this month. “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.”