Consumers need to be cautious to avoid getting trapped: Finance Ministry on Bitcoins

New Delhi: Even as Bitcoin has touched new highs recently fuelling investor interest, the Finance Ministry has warned the public of the risks of virtual currencies (VCs) saying that these Virtual Currencies (VCs) don’t have intrinsic value and are not backed by any assets.

The ministry warned consumers and asked them to be cautious as to avoid getting trapped.

The finmin said that there has been phenomenal increase in price of Virtual Currencies including Bitcoin in India and globally.

Price of Bitcoin and other VCs is matter of speculation resulting in spurt and volatility in prices, it said. There is a real and heightened risk of investment bubble of the type seen in ponzi schemes that can result in sudden and prolonged crash exposing investors, especially retail consumers losing money.

Warning consumers and investors against investment in Bitcoins the RBI had recently said that users are exposed to potential losses on account of such volatility in value.

There is no underlying or backing of any asset for VCs and as such, their value seems to be a matter of speculation, the RBI had said.