Govt Red Flags BitCoin Trading; Compares Virtual Currencies With Ponzi Schemes

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After the crackdown on trading in virtual currencies including bitcoins by South Korean government, the ministry of Finance today cautioned once again against trading in bitcoins and compared these to ponzi schemes.

Govt Red Flags BitCoin Trading; Compares Virtual Currencies With Ponzi Schemes

On Thursday, the bitcoin rate declined by 9% and traded below USD 14000 at USD 13,828 as South Korea planned crackdown on cryptocurrencies. At present the bitcoin value is close to USD 14000.

In a statement the ministry said, "There has been a phenomenal increase in recent times in the price of Virtual 'Currencies' (VCs) including Bitcoin, in India and globally. 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 further added, "Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes".

The ministry also raised alarm on the likely instance of permanent loss of money due to bitcoin investing as a result of malware attack, loss of password or hacking as it is held in digital or electronic form.

Previous to this the RBI has cautioned traders and users in virtual currencies against various risks such as financial, security-related, operational, legal and other threats which come inherent with trading in virtual currencies including bitcoins.

"RBI has also clarified that it has not given any licence/ authorization to any entity/ company to operate such schemes or deal with Bitcoin or any virtual currency. 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 investors and other participants therefore deal with these VCs entirely at their risk and should best avoid participating therein," the finance ministry statement added.

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