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Trade in bitcoins at your own risk, finance ministry warns users

Trade in bitcoins at your own risk, finance ministry warns users

Trade in bitcoins at your own risk, finance ministry warns users

The recent Bitcoin surge has triggered a ponzi scheme fear,in India, forcing the finance ministry to flag it on Friday.

"VCs (virtual currencies) such as bitcoins 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," the ministry said in a statement.

The government is currently in a huddle to find out how to create safeguards against such a risk.

Flagging the risk, the ministry said 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, the ministry warned, adding that currencies stored in digital/electronic format are vulnerable to hacking, loss of password, malware attack etc. that may also result in permanent loss of money.

There is a suspicion that some so-called cryptocurrencies and bitcoin investments may actually have nothing to do with any blockchain-developed virtual currency and are just new ways devised by scamsters to ride the wave and what they may be offering could be 'e-ponzi' schemes.

The ministry, along with the RBI and Sebi, is in the process of creating a framework to safeguard gullible investors and to clamp down on the fraudsters who may try to manipulate the regulatory gaps.

The users, holders and traders of VCs have already been cautioned three times, in December, 2013, February, 2017 and December, 2017, by Reserve Bank of India about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to by investing in Bitcoin and/ or other VCs.

The Income Tax Department had recently conducted survey operations at major Bitcoin exchanges across the country on suspicion of alleged tax evasion. They said various teams of the sleuths of the department, under the command of the Bengaluru investigation wing, visited the premises of nine such exchanges in the country including in Delhi, Bengaluru, Hyderabad, Kochi and Gurugram.

 

Source: ET Online|Dec 29, 2017, 11.26 AM IST

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member