BITCOIN WARNING: Government issues Ponzi scheme alert over cryptocurrencies
THE Indian government has cautioned cryptocurrency investors as they have compared cyber-currencies such as bitcoin to being similar to Ponzi schemes.
The finance ministry has warned these currencies are vulnerable to hacking due to the fact they are stored in electronic format and suffer potential malware attacks.
The ministry said in a statement: “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 on alert and extremely cautious as to avoid getting trapped in such Ponzi schemes.”
Pon Radhakrishanan, minister of state for finance said in the Lok Sabha, the lower house of India’s parliament, warned the Department of Economic Affairs had constituted an inter-disciplinary committee to analyse the existing global regulatory and legal structures surrounding bitcoin.
Three warnings have already been issued by the Reserve Bank of India (RBI) regarding the financial, legal and security related risks that citizens expose themselves to when investing in bitcoin.
More importantly the RBI has continuously stated that they have given no licence or authorisation to any business or entity to run such schemes that manage bitcoin.
The Ministry added: ”The government also makes it clear that cryptocurrencies are not legal tender and such cryptocurrencies do not have any regulatory permission or protection in India.
“The investors and other participants, therefore, deal with these cryptocurrencies entirely at their risk and should best avoid participating therein.”
It also said such currencies are being used to fund illegal activities, such as terror-funding, smuggling, drug trafficking and other money-laundry acts.
The Government and Ministry have made their message clear that they do not believe the cryptocurrencies should be trusted and that people should be fully aware of the risks.