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Investors should take extra caution when investing in them said at the Ministry of Finance on Friday.
The ministry added that cryptocurrencies do not have "intrinsic value", as well as support for any assets and "simple speculation" - the only reason their prices continue to grow.
In its statement, the ministry confirmed that there is a real and increased risk of an investment bubble in the cryptocurrency market, which is similar to Ponzi's schemes. This can lead to an immediate and prolonged failure, when investors, especially retail consumers, can lose all their hard-earned money.
The government of India is yet to introduce rules regarding the digital currency market, but it is already created an interdisciplinary committee for research and development of the regulatory framework for the sector.
The committee included the country's central bank, the Reserve Bank of India (RBI).
Meanwhile, the Supreme Court of India appealed to the government in November to begin developing a regulatory framework for "controlling the flow of Bitcoin" in the country.
Despite the latest warning, the finance ministry has not implemented a complete ban on virtual currency trading and has not announced any measures that will curb the adoption and trade of digital currencies in India.
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