The government of India has issued a warning once again against investors buying cryptocurrencies or similar virtual currencies. The ministry of finance compared the ongoing ‘bitcoin bubble’ to a Ponzi scheme that may cause investors to lose their hard-earned money. This is the fourth official warning issued by the government. The Reserve Bank of India (RBI) has warned investors three times earlier regarding the financial, operational, and legal validity of virtual currencies.
The ministry stated that the price of cryptocurrencies like bitcoins are not backed by any assets. Moreover, these currencies are not officially recognized by the government. Since there is no physical attribute to this currency, it is believed that no governments are expected to officially recognize this as a currency form in the near future.
The official press release from the ministry of finance states, “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 and result in 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 statement also said that there is no authorized medium of exchange for these virtual currencies. Since cryptocurrencies exist only in the digital format, they are prone to various digital threats including hacking, loss of password, or malware attacks. The transactions of virtual currencies are encrypted, and this makes them ideal for various illegal activities such as terror funding, money laundering, drug trafficking, etc.
A few weeks ago the income tax department raided several bitcoin exchanges in the country and investigated the possibility of tax evasion through bitcoins. At the time of writing this news, bitcoin is currently trading at a price over $14,500. This month witnessed a huge bubble with bitcoin prices reaching as high $18,000. The warning issued by the government against buying cryptocurrencies was mainly for consumer protection.
BankBazaar urges its readers to take extreme caution before trading, mining or investing in virtual currencies. BankBazaar does not endorse cryptocurrencies or making investments in cryptocurrencies in any manner. Our only goal is to provide information to our visitors about cryptocurrencies. We advise our readers to consider investing in Mutual Funds, Fixed Deposit, ULIPs and other legally recognised investment avenues rather than risking their capital on extremely volatile and unregulated assets like cryptocurrencies.
The Reserve Bank of India (RBI) issued a Press Release on December 24, 2013, cautioning users, holders and traders of virtual currencies including Bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with virtual currencies. RBI has also clarified vide press release dated February 1, 2017 that it has not given any licence/authorisation to any entity/company to operate such schemes or deal with Bitcoin or any VC.
The Ministry of Finance issued a statement on December 29, 2017 stating that virtual currencies are not legal tender. Mr. Arun Jaitley in his budget speech on February 1, 2018 has clearly stated that the Government does not consider cryptocurrencies legal tender or coin.
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