NEW DELHI: India warned citizens against investing in virtual currencies such as bitcoin, ripple and ethereum, comparing them with pyramid schemes, reminding that these were not legal tender and lacked any regulatory permission or protection. It’s the first such caution by the government on cryptocurrencies , although the Reserve Bank of India has previously issued warnings.“Investors and other participants therefore deal with these VCs (virtual currencies) entirely at their (own) risk and should best avoid participating,” said a finance ministry release on Friday.India has, however, not announced any curbs on cryptocurrencies. China has imposed a ban on virtual currencies and South Korea said on Thursday it would bring in measures to regulate speculation in them. These developments came amid a decline in the value of bitcoins from a peak of $19,511 on December 18 to around $15,000 now.Opinions are sharply divided on cryptocurrencies. Bitcoin sceptics include JP Morgan chief executive Jamie Dimon who described anyone trading in it as “stupid” and warned that it would “blow up.” But while Warren Buffett has dubbed it a “bubble,” Microsoft founder Bill Gates has said “bitcoin is better than currency”. CME Group and Cboe Global Markets Inc introduced futures contracts on bitcoins earlier this month.The warning comes as Indian companies associated with the trade in virtual currency such as Unocoin, Global DCX and Coinsecure field queries looking to take advantage of bitcoin’s ride. All of them are looking to step up hiring in anticipation of an increase in business, ET reported last week.India’s finance ministry sees no value in virtual currencies.“VCs are not backed by government fiat. These are also not legal tender. Hence, VCs are not currencies. These are also being described as ‘coins.’ There is, however, no physical attribute to these coins. Therefore, virtual ‘currencies’ are neither currencies nor coins,” it said in the first such formal statement from the government on the issue.Pointing to the surge in value of bitcoins in recent times, the government 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.”There is a real and heightened risk of these creating an investment bubble of the type seen in pyramid schemes, which can result in a sudden and prolonged crash exposing investors, especially retail investors who could lose their hard-earned money, the government said.“Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes. VCs are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack, etc., which may also result in a permanent loss of money,” it 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.”