Government awaits expert report before taking action against cryptocurrencies

A week later after cautioning investors from investing in virtual currencies such as Bitcoin and Litecoin, likening them to Ponzi schemes, the government has ruled out any immediate action against cryptocurrencies.

Finance Minister Arun Jaitley Tuesday said the government was awaiting the report of an experts group that was constituted to look into virtual currencies.

“There are such a large number of cryptocurrencies that are operating globally and they can operate from any part of the world. Therefore, rather than taking any knee-jerk action immediately, we are awaiting the report. Once the report comes, only then we will take the measured steps that are required,” he said.

In April 2017, the government formed a panel to study the existing framework for virtual currencies. The main aim of the panel was to take stock of the status of virtual currencies both in India and globally, examine global regulatory and legal structures governing them, suggest measures on consumer protection, money laundering and examine any other relevant matter related to virtual currencies.

Last week, the Indian government had cautioned consumers to be alert before investing in virtual currency like Bitcoin and compared it with notorious Ponzi schemes.

According to the statement by Finance Ministry, the Virtual Currencies (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 statement added.

The Reserve Bank of India (RBI) had also cautioned potential investors about the risks in investing in cryptocurrencies like bitcoins on three earlier occasions in December 2013, February 2017 and December 2017.