The Indian government issued a cautionary statement to cryptocurrency investors on Friday, warning them about a “real and heightened risk of investment bubble of the type seen in Ponzi schemes.” The statement was issued by the finance ministry, and echoed similar warnings from the Reserve Bank of India (RBI) in early December. The warning suggested that those investors could suffer losses in the event of a sudden crash.
The finance ministry statement also noted that digital currencies are not recognized as legal tender, and lack regulatory approval and legal protection. As a result, anyone trading or otherwise interacting with cryptocurrencies does so “entirely at their risk.”
The warning did not suggest that digital currencies were being banned, and it provided no new regulatory restrictions. It did, however, recommend that investors avoid cryptocurrencies. The ministry statement also repeated the standard warnings about how digital currencies might be used for illicit activities like money laundering and terror-financing.
Indian officials have been examining digital currencies for some time now, as the government tries to come to terms with the nascent industry. In recent months, RBI has expressed discomfort with the technology, while the country’s tax authorities have searched for effective ways to tax crypto transactions. The nation’s Supreme Court has even gotten involved in the debate, calling on the government to respond to concerns about cryptocurrencies.