India’s finance ministry today issued a warning against the use of cryptocurrencies, Reuters reported.
In a new statement issued Dec. 29, India's Ministry of Finance warned residents against the risks associated with trading cryptocurrencies,comparing the digital assets to "Ponzi schemes."
"The price of Bitcoin (Bitcoin) and other [virtual currencies] 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,” the Ministry said.
Therefore, it said users will bear the potential financial, operational, legal and security related risks when investing in cryptocurrencies.
“Cryptocurrencies are not legal tender and have no regulatory permission or protection in the country,” the finance ministry said in a statement.
The ministry also cautioned that encrypted transactions in cryptocurrency were likely being used for illegal activities such as “terror-funding, smuggling, drug trafficking and other money laundering acts.”
India currently has no regulation for cryptocurrencies. Last week, India’s capital market regulator said it was in talks with the government and central bank on how to regulate cryptocurrencies.