Finance Ministry follows RBI, warns about cryptocurrencies 

Finance Ministry follows RBI, warns about cryptocurrencies 

Context

Cryptocurrency

What has happened?

The government has joined the Reserve Bank of India in cautioning potential customers about investing in cryptocurrencies like bitcoin, likening them to ponzi schemes where investors risk losing their money

What did the government issued statement say?

• 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
• Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes
• The government added that since VCs are stored in an electronic format, this makes them vulnerable to hacking, loss of password, malware attacks, etc, which could also result in a permanent loss of money

Private sector players agree

• Private sector cryptocurrency players agree with the Finance Ministry’s call for caution, adding that the bulk of the cryptocurrencies in the market are not reliable
• Responsibility of Finance ministry to warn consumers: “It becomes more challenging for us to build a credible image,” Ashish Agarwal, founder of Bitsachs said. “I won’t say the Finance Ministry is wrong. Apart from the major currencies like Bitcoin, about 90% of the other currencies are scams. It is the responsibility of the Finance Ministry to warn consumers.”

Warnings by RBI

The Reserve Bank of India has issued three warnings, two of them this year, about the potential financial, operational, legal, customer protection, and security related risks associated with investing in virtual currencies.