New Delhi: The Government of India on Friday cautioned investors to be wary of cryptocurrencies like Bitcoin, saying they are like Ponzi schemes with no legal tender and protection.
"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 Finance Ministry said in a statement.
Noting that there has been a phenomenal increase in recent times in the price of virtual currencies (VCs) including Bitcoin, in India and globally, it said, the 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," it said.
The Indian government warning against bitcoin and other cryptocurrencies came three days after Morgan Stanley, a leading global financial services firm providing investment banking, securities, wealth management and investment management services, raised similar concerns.
Earlier, the Reserve Bank of India (RBI) on several occasions had clarified that it had not given any licence or authorisation to any entity to operate such schemes or deal with bitcoin or any other virtual and cryptocurrencies.