BitPay builds tools for secure bitcoin payment acceptance, savings, and spending. Photo: BitPay
India’s Ministry of Finance has cautioned against the use of virtual currencies (VCs) such as Bitcoin.
In an official statement released today, the government said 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.
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.
[ Also Read: Bitcoin ATMs Planned in Major European Cities ]
Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes. VCs are stored in digital / electronic format, making them vulnerable to hacking, loss of password, malware attack, etc. which may also result in permanent loss of money.
As transactions of VCs are encrypted they are also likely being used to carry out illegal / subversive activities, such as, terror-funding, smuggling, drug trafficking and other money-laundering acts.
[ New Service Allows Mobile Recharge with Bitcoin ]
VCs are not backed by government. These are also not legal tender. Hence, VCs are not currencies. These are also being described as ‘Coins’. There is however no physical attribute to these coins. Therefore, according to the government, VCs are neither currencies nor coins. The government or Reserve Bank of India has not authorised any VCs as a medium of exchange.
Further, 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 VC. The government statement warned that persons dealing in them must consider these facts and beware of the risks involved in dealing in VCs.