The Finance Ministry on Friday cautioned consumers that the surge in prices of virtual currencies like Bitcoin is a matter of speculation and could lead to an investment bubble resulting in huge losses for investors. The ministry explained that these virtual currencies have no intrinsic value and are not backed by any assets which put investors at high risk of getting trapped into ponzi-like schemes that can cause sudden losses.
In a media release, the ministry said, “The government or any other regulator in India has not given license to any agency for working as exchange or any other kind of intermediary for any virtual currency. Persons dealing in them must consider these facts and beware of the risks involved in dealing in virtual currencies.”
The Union ministry has said these virtual currencies are not legal tenders even if they use terms like ‘coins’ to describe themselves. Since there is no physical attribute, it is neither a currency nor a coin.
The ministry further clarified that the users, holders and traders of virtual currencies have been cautioned by the RBI notifying about the potential financial, operational, legal, customer protection and security related risks virtual currencies can pose.