Bitcoin, Cryptocurrencies are Like Ponzi Schemes, Says India’s Government
In a public warning on Friday, India’s finance ministry cautioned citizens against investing in virtual currencies like bitcoin, likening them to ponzi schemes.
India’s Ministry of Finance issued a statement today cautioning people ‘against risks investing in virtual currencies including Bitcoin’, claiming they lack intrinsic value and aren’t backed by any assets. ‘Mere speculation’ is driving prices of bitcoin and other virtual currencies, the finance ministry said.
An excerpt from the notice read:
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.
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.’
Further, the ministry warned investors that they adopting or trading cryptocurrencies “entirely at their risk” due to a lack of consumer protection. They ‘should best avoid participating’ in cryptocurrencies, the authority added, leaving no illusion as to where it stands on acknowledging decentralized cryptocurrencies.
The ministry also pointed to three separate cautions by India’s central bank in late 2013, February 2017 and December 2017 voicing similar warnings to today’s statement.
Repeated cautions aside, 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 called on the government to get the ball rolling on developing a framework to “regulate the flow of Bitcoin” in the country.
In spite of today’s warning, India’s finance ministry – like the central bank before it – hasn’t announced a blanket ban on cryptocurrency trading nor has it introduced any curbs to put barriers on the adoption and trading of cryptocurrencies.
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