India Equates Cryptocurrencies To Ponzi Schemes In Warning
December 29 2017 - 4:17AM
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India's finance ministry on Wednesday issued a warning against
trading and transacting in crytpocurrencies such as Bitcoin, saying
they do not have any intrinsic value and likened them to Ponzi
schemes.
The virtual currencies, or VCs, are not backed by any kind of
assets and the price of Bitcoin and its peers is "entirely a matter
of mere speculation", 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," the ministry warned.
The price of Bitcoin, the largest cryptocurrency by value,
surged nearly 20-fold, or over 1,900 percent, this year, from under
$900 at the start of the year to a record high of almost $20,000
around December 17.
Amid repeated calls for caution, the price of Bitcoin plummeted
to below $11,000 on December 22, just days after futures trading in
the cryptocurrency began in Chicago exchanges. And it is such wild
swings that are raising the crash warnings.
The finance ministry said that cryptocurrencies are not
currencies as they are not backed by government fiat and are not
legal tender. The ministry also noted that though the digital
currencies are described as 'coins', they do not have the physical
attributes.
"The Government or Reserve Bank of India has not authorized any
VCs as a medium of exchange," the ministry said in the
statement.
The RBI already cautioned investors thirce against the risks in
cryptocurrencies. The first warning came in December 2013. The
second one was issued in February this year and the third, earlier
this month, as the value of Bitcoin scaled new highs amid increased
investor interest and signs of acceptance into the mainstream
financial market.
"The Government also makes it clear that VCs are not legal
tender and such VCs do not have any regulatory permission or
protection in India," the ministry said.
"The investors and other participants therefore deal with these
VCs entirely at their risk and should best avoid participating
therein."
Reports suggest the Bitcoin boom is largely led by Asian
countries. That said, the recent rise of the cryptocurrency
prompted authorities in Asia Pacific countries from China to
Australia to issue warnings against the use of such currencies.
China banned trading in Bitcoin and initial coin offerings in
September.
Earlier this week, the South Korean government said that it was
planning to implement special measures to curb speculation in the
virtual currency market. New measures will require real-name
cryptocurrency transactions and the government also plans to ban
cryptocurrency exchanges.
The Monetary Authority of Singapore urged the public last week
to act with extreme caution and to understand the significant risks
they take on if they choose to invest in cryptocurrencies.
In Israel, the stock market watchdog has sought a ban on
companies trading in cryptocurrencies from listing on the Tel Aviv
stock exchange. The Israel Securities Authority also wants a
suspension of such firms currently operating on the stock
exchange.
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