The finance ministry of India warned investors regarding risks involved in investing in cryptocurrency such as bitcoin on Friday. It outlined that investments in digital currency are similar to “Ponzi Scheme”.
In a statement, India’s finance ministry stated that cryptocurrency do not have any legal tender, regulatory permission, or protection in the country. However, it has not imposed any ban or any curbs on trading in digital currency.
The statement highlighted that investors and other people trading in such cryptocurrencies are dealing at their own risks and should avoid investing in such volatile industry.
“There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes”, said the statement. It added that investors have been taking risks of a sudden and prolonged crash.
The ministry issued a caution, outlining that encrypted transactions in cryptocurrency might be used to conduct illegal activities such as “terror-funding, smuggling, drug trafficking and other money laundering acts.”
There is no regulation regarding cryptocurrency in India. Following the footsteps of other global policymakers, the finance ministry has been trying to determine how to supervise this industry which seems as a speculative bubble.
“Mere issuance of an advisory is not sufficient when thousands of people have lost money in cryptocurrency,” said Pavan Duggal, a cyber expert and a lawyer with India’s top court. “Government has the sovereign duty to come up with a legal framework to regulate the cryptocurrencies and protect genuine investors.”
Last week, a capital market regulator of India stated it was having discussion with the central bank and the government on regulating cryptocurrencies.