Don’t Get Trapped in Ponzi Schemes: Finance Min Warning on Bitcoin

The warning comes weeks after the income tax department raided nine bitcoin exchanges across India.

The RBI and Ministry of Finance have cautioned Indians against trading in cryptocurrencies in the past as well.

(Photo Courtesy: The News Minute)

The Ministry of Finance, in a statement on 29 December, cautioned citizens against investing and trading in bitcoin and other similar altcoins or cryptocurrency.

The statement comes weeks after the Income Tax department conducted raids on nine cryptocurrency trade exchanges across India.

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.

Ministry of Finance Statement

Investors and traders of cryptocurrency have been cautioned by the RBI in the past as well, about the potential security risks of trading in virtual currencies. The concerns the RBI raised are primarily based on customer protection and mention financial, operational, and legal risks.

The statement from the Ministry of Finance adds that bitcoin and cryptocurrencies aren’t ‘legal tender’ and they don’t have government authorisation.

Virtual Currencies (VC) are not backed by Government fiat. These are also not legal tender. Hence, VCs are not currencies. These are also being described as ‘coins’. There is however, no physical attribute to these coins. Therefore, Virtual ‘Currencies’ (VCs) are neither currencies nor coins.

Ministry of Finance Statement

The concerns from the Reserve Bank of India and the Ministry of Finance have grown more frantic in November-December 2017, with the stark rise in the valuation of bitcoins from $2000 to above $15,000, and crossing the $17,000 mark in less than a month.

It has been estimated that India now accounts for over 10 percent of the global Bitcoin trade. In the past 12 months, Bitcoin has witnessed a staggering growth of over 1,200 percent in value, and remains a favorite among cryptocurrency enthusiasts pan-India.

(With inputs from PIB)

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