What was the buzz word of 2017? Yes, GST and Jio came close but it was certainly bitcoin that stole the show towards the latter half of the year. It was hard to find a person who was not thinking about investing in this virtual currency and even if you did, there is a good chance that the person concerned would still be talking about it! If you are also planning to invest in bitcoin, you should read the latest warning by the government. In a press release on Friday, the Ministry of Finance warned people against investing in virtual currencies by comparing them to Ponzi schemes. “Government Cautions People Against Risks in Investing in Virtual ‘Currencies’; Says VCs are like Ponzi Schemes,” the ministry said in a tweet.
It further added that even though the Virtual ‘Currencies’ (VCs) including Bitcoin have increased phenomenally in the recent past, they don’t have any intrinsic value and are not backed by any kind of assets. “The price of Bitcoin and other VCs, therefore, is entirely a matter of mere speculation resulting in spurt and volatility in their prices. 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,” the official statement said.
The ministry said that the customers need to be very cautious and make sure that they are not trapped in any Ponzi Schemes like this. It said that since the virtual currencies are stored in digital/electronic format, they are vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money.
“Since the VCs are encrypted, they can also be used to carry out illegal/subversive activities, such as, terror-funding, smuggling, drug trafficking and other money-laundering Acts,” the statement said.
The government clarified that VCs are not even currencies and there is no physical attribute to these coins (referring to bitcoin).
“The Government or Reserve Bank of India has not authorised any VCs as a medium of exchange. Further, the Government or any other regulator in India has not given license to any agency for working as exchange or any other kind of intermediary for any VC. Persons dealing in them must consider these facts and beware of the risks involved in dealing in VCs,” it added.
The Reserve Bank of India has already cautioned the users, holders and traders of VCs three times in the past: in December, 2013, February, 2017 and December, 2017.