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Indian Finance Ministry cautions against digital currencies

Following the South Korean government’s recent efforts to curb speculation in cryptocurrency trading, the Indian government has also issued a warning on digital currencies.

The Ministry of Finance today issued a statement urging people to become aware of the risks involved when engaging in the digital currency space.

The finance ministry believes the recent spurt in the price of digital currencies such as bitcoin is being driven only by speculation and underscored the risk of an investment bubble. It said that digital currencies “don’t have any intrinsic value and are not backed by any kind of assets” and added that they are not legal tender.

“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,” the statement reads.

Noting the past warnings issued by the Reserve Bank of India, the ministry said:

“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. Persons dealing in them must consider these facts and beware of the risks involved in dealing in VCs.”

“The Government also makes it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants therefore deal with these VCs entirely at their risk and should best avoid participating therein."

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