India’s finance ministry on Wednesday issued a warning against trading and transacting in crytpocurrencies such as Bitcoin, stating they do not have any intrinsic worth and compared them to Ponzi schemes.
The virtual currencies, or VCs, are not backed by any type of properties and the price of Bitcoin and its peers is “completely a matter of simple speculation”, the ministry said in a declaration.
“There is a heightened and genuine threat of investment bubble of the type seen in ponzi schemes which can lead to abrupt and prolonged crash exposing investors, particularly retail customers losing their hard-earned money,” the ministry cautioned.
The rate of Bitcoin, the largest cryptocurrency by worth, rose almost 20-fold, or over 1,900 percent, this year, from under $900 at the start of the year to a record high of nearly $20,000 around December 17.
In the middle of repeated calls for caution, the price of Bitcoin plunged to below $11,000 on December 22, simply days after futures trading in the cryptocurrency began in Chicago exchanges. And it is such wild swings that are raising the crash cautions.
The financing ministry stated that cryptocurrencies are not currencies as they are not backed by government fiat and are not legal tender. The ministry likewise noted that though the digital currencies are referred to as ‘coins’, they do not have the physical characteristics.
“The Government or Reserve Bank of India has not licensed any VCs as a cash,” the ministry stated in the declaration.
The RBI currently warned investors thirce versus the dangers in cryptocurrencies. The first warning came in December 2013. The second one was provided in February this year and the 3rd, previously this month, as the worth of Bitcoin scaled brand-new highs amidst increased investor interest and indications of acceptance into the mainstream monetary market.
“The Federal government likewise makes it clear that VCs are not legal tender and such VCs do not have any regulatory consent or defense in India,” the ministry said.
“The financiers and other individuals for that reason deal with these VCs totally at their danger and need to best avoid taking part therein.”
Reports suggest the Bitcoin boom is largely led by Asian nations. That said, the current rise of the cryptocurrency prompted authorities in Asia Pacific nations from China to Australia to issue cautions versus making use of such currencies.
China prohibited trading in Bitcoin and preliminary coin offerings in September.
Previously today, the South Korean government stated that it was planning to implement unique steps to curb speculation in the virtual currency market. New steps will need real-name cryptocurrency deals and the government likewise prepares to ban cryptocurrency exchanges.
The Monetary Authority of Singapore advised the public last week to act with severe care and to comprehend the substantial dangers they take on if they choose to purchase cryptocurrencies.
In Israel, the stock exchange watchdog has sought a restriction on companies trading in cryptocurrencies from noting on the Tel Aviv stock market. The Israel Securities Authority also wants a suspension of such companies presently operating on the stock market.
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