The government today cautioned investors to be wary of virtual currencies like Bitcoin, saying they are like Ponzi schemes with no legal tender and protection.
“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 Finance Ministry said in a statement.
VCs are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money, it said.
Noting that there has been a phenomenal increase in recent times in the price of virtual currencies (VCs) including Bitcoin, in India and globally, it said, the VCs 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,” it said.