India’s Ministry of Finance has claimed that Bitcoin and the other digital currencies are “like Ponzi schemes” and investors should take extra caution when investing in them, in a statement issued this Friday.
The ministry added that the cryptocurrencies lack “intrinsic value,” as well as the backing by any assets and “mere speculation” is the only reason why their prices continue to increase.
In its statement, the Ministry reiterated that there is a real and heightened risk of an investment bubble in the cryptocurrency market that is similar to Ponzi schemes. This may result in an immediate and prolonged crash where investors, particularly the retail consumers, may lose all their hard-earned money.
Part of the statement reads:
“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.”
The government of India is yet to introduce regulations covering the digital currency market, but it already created an interdisciplinary committee to research and to develop a regulatory framework for the sector.
The committee’s members included the country’s central bank, the Reserve Bank of India (RBI).
Meanwhile, the Indian Supreme Court has issued an appeal to the government in November to start the drafting of a regulatory framework to ‘control the flow of Bitcoin’ in the country.
Despite its latest warning, the finance ministry has not implemented a total ban on virtual currency trading and has not announced any measures that will curb the adoption and trading of digital currencies in India.