India Says Bitcoin As Risky As Ponzi Schemes
Consumers need to be alert and cautious as to avoid getting trapped in such ‘ponzi schemes’
The government today cautioned the general public against investing in virtual currencies, calling them as risky as ponzi schemes.
Virtual currencies like bitcoins are not backed by any assets, and their price is a ‘mere’ speculation leading to volatility, the Finance Ministry said in a statement.
Value of bitcoin has jumped more than 1,700 percent in 2017. Its price as of 10.20 am today was $14,847, or about Rs 9.50 lakh a unit, according to blockchain news site CoinDesk.
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.Finance Ministry Release
Consumers need to be alert, and cautious as to avoid getting trapped in such ‘ponzi schemes, the release added.
No Authorised Backing
Virtual currencies are not backed by government fiat, it said, adding that the Centre or the Reserve Bank of India has not authorised any such currency as a medium of exchange.
The Indian government or any regulator has not given licence to any agency for working as an exchange or any other kind of intermediary for virtual currencies.
The RBI had recently clarified that it has not given any licence to any entity to operate as exchanges to trade in bitcoins or other virtual currencies.
The government also reiterates that virtual currencies are not legal tender, the statement said.
Virtual currencies are transacted through a decentralized system with computers around the world processing such transactions in a peer-to-peer way through digital ledgers.
In August, Arjun Ram Meghwal, the then minister of state for finance had informed Rajya Sabha that creation, trading or usage of virtual currencies including bitcoins, as a medium of payment, is not authorised by any central bank or monetary authority.
Cryptocurrencies like bitcoins are neither currency nor coin. Not legal tender in India at all. Trade in these currencies has assumed character of classical Ponzi schemes. Limited supply and uninformed demand makes every new investor assume higher risk. No underlying real value.— Subhash Chandra Garg (@SecretaryDEA) December 30, 2017
A committee has been set up with representatives from Department of Economic Affairs, Department of Financial Services, Department of Revenue, Ministry of Home Affairs, Ministry of Electronics and Information Technology, Reserve Bank of India, NITI Aayog and State Bank of India, he had said.
The objectives of committee is to take stock of the present status of virtual currencies in India and globally, and examine the existing global regulatory and legal structures governing virtual currencies. The panel has also suggest the framework for regulation of virtual currencies relating to consumer protection, taxation, and money laundering, he had said.