Last Friday, investors were by the Finance Ministry about the risks of trading in crypto currencies like Bitcoin and said that these digital currency investments are like Ponzi schemes. The Ministry of Finance said in a statement that crypto currencies are not legal tender and have no regulatory permission or protection in the country but stopped short of declaring an outright ban or imposing any curbs.
The statement further said that depositors and other participants dealing with such digital currencies are doing these entirely at their risk and should best avoid participating therein. The statement from the ministry also added that there is a real and sensitive risk of investment bubble as seen in Ponzi schemes (is a fraud offering unusually with high returns, together with early investors paid off with money from later investors) with investors risking a sudden and prolonged crash.
The finance ministry also warned that the encrypted transactions in cryptocurrencies were very likely being used for unlawful activities such as terror-funding, smuggling, drug trafficking and other money laundering acts. India at present has no guideline for trading cryptocurrencies and like any other global policymakers; it is understanding how to supervise a market that many thinks is a speculative bubble. Pavan Duggal, a cyber expert and a lawyer with the Supreme Court said that giving advice is not sufficient when thousands of people have lost money in cryptocurrency and the government has the autonomous duty to come up with a legal framework to regulate the cryptocurrencies and protect genuine investors.
Last week, India’s capital market regulator SEBI also said it was in talks with the government and central bank on how to regulate cryptocurrencies. Digital currencies are becoming very popular across Asia with many retail investors giving up their daily jobs to trade these currencies.