The Indian government has cautioned people against the risk of virtual currencies, stating they are not legal tender and do not have any regulatory permission or protection in India. The administration issued a strict warning saying it does not back virtual currencies. A government statement said, “These are also not legal tender. Hence, virtual currencies are not currencies. These are also being described as 'coins'. There is, however, no physical attribute to these coins. Therefore, virtual 'currencies' (VCs) are neither currencies nor coins. The government or RBI 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.”
The statement said there has been a phenomenal increase in recent times in the price of VCs, including Bitcoin, in India and across the globe. “There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes,” the statement said.
Explaining the way the currencies are traded, the government said they are stored in digital, electronic format, making them vulnerable to hacking, loss of password, malware attack, also permanent loss of money. The statement said, “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.”
