India likens cryptocurrencies to Ponzi scheme, cautions investors

FILE PHOTO: A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration
FILE PHOTO: A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration taken December 8, 2017. REUTERS/Benoit Tessier/Illustration/File Photo

December 29, 2017

NEW DELHI (Reuters) – India’s finance ministry on Friday cautioned investors about the risks of trading in cryptocurrencies such as bitcoin, saying digital currency investments are like “Ponzi schemes.”

Cryptocurrencies are not legal tender and have no regulatory permission or protection in the country, the finance ministry said in a statement, but stopped short of announcing an outright ban or imposing any curbs.

Investors and other participants dealing with such digital currencies are doing so “entirely at their risk and should best avoid participating therein,” the statement said.

“There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes”, with investors risking a sudden and prolonged crash, the statement said.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

The ministry also cautioned that encrypted transactions in cryptocurrency were likely being used for illegal activities such as “terror-funding, smuggling, drug trafficking and other money laundering acts.”

India currently has no regulation for cryptocurrencies, and like other global policymakers, it is seeking to understand how to supervise a market that many feel is a speculative bubble.

“Mere issuance of an advisory is not sufficient when thousands of people have lost money in cryptocurrency,” said Pavan Duggal, a cyber expert and a lawyer with India’s top court.

“Government has the sovereign duty to come up with a legal framework to regulate the cryptocurrencies and protect genuine investors,” he said.

Last week, India’s capital market regulator said it was in talks with the government and central bank on how to regulate cryptocurrencies.

Bitcoin, the world’s biggest and best-known cryptocurrency, has gained more than 19-fold this year.

Digital currencies are very popular across Asia, with many retail investors giving up their daily jobs to trade them full time in countries such as Japan and South Korea, which together make up for more than half the global trading volumes by some estimates.

On Thursday, South Korea’s government said it would impose additional measures to regulate speculation in cryptocurrency trading within the country.

(Reporting by Malini Menon and Manoj Kumar; Editing by Shri Navaratnam)

  • Daniel Shays

    I created my own currency. I’m a billionaire now.

    • Daniel Shays

      Oh, it just tripled in value! Hurry, selling and trading now!

  • Pap Danko

    roscoe: well said, it’s a warning for those fools who think it’s real.

  • Stuck_in_Ca√→

    Bitcoin is BS, the end.

  • Johnny G.

    Crypto currencies is a fraud in motion! Forget it. If you quit your day job to work with this stuff, than your a fool.

  • C B

    if your not wealthy with plenty of disposable income stay away from risk investment of any kind ………

  • Ty

    Bitcoin is the modern day “tulip bulb craze”.

  • John Fox

    It’s more of a pyramid scheme than a ponzi scheme …. get all of your friends to buy the product, and they get their friends to buy. Once the pyramid is big enough, the big guys, who all jumped in when it was easy to farm and prices were low, take their profits and leave, dumping the prices. It’s more like beanie babies than money.

    What I think is hilarious is the biggest ‘selling’ point/lie has been anonymity of transactions. You can’t buy a home, car, or boat in the US without providing the purchase price and paying taxes and fees. And the US government already taxes gains on cyrptocurrency, so again, you have to report transactions.

    If cryptocurrency ever becomes main stream (which I doubt because who wants to go broke just because they lose their key), you can bet a large portion of the anonymity will go away as it’s regulated and taxed like any other source of income.

  • kevin conen

    I learn more from the comments than the stories. Keep it up people.

  • Trzo9veuha

    I wondered when that comparison would surface.

  • landy fincannon

    LOL. Governments have some nerve call Bitcoins a ponzi scheme.
    What do you think a fiat currency is?
    Congress had to pass a law to make Federal Reserve Notes legal tender.

    There is no inherent value in any nations currency. India gave up their right to the IMF years ago

  • whoselineisitanyway

    CHINA IS CORRECT.
    What a scam.

  • Roscoe

    The rich buy the coins when the price is low and that starts to drive the price up. When the profit is sufficient they dump their coins and they win while the little guy loses as this drives the price down. Repeat this as often as possible and the rich get richer and the little guy ends up the loser.
    If you know nothing about stocks invest in mutual funds with good reliable companies that have low service fees.
    I think the Barack Husein BenLyin Obozo makes the coins in his basement.
    Bitcoin is a Ponzi scheme.

    • All American

      By gosh I believe that you hit the nail directly on the head! I wouldn’t doubt if Billy and Hilly were in on it too!

      • Roscoe

        Bill and Hellary come over and help Obozo when he is making coins and get a 10% cut of the production run to sell anytime they please.

        • All American

          AKA: “The 3 stooges And their sheeple “following” …
          Hey Ive got some Ocean Front Property in Arizona and from my front porch you can see the sea…yeah😉

          • Roscoe

            Amen! The rich get richer from the poor being stupid with money!

  • nfcapitalist

    Where are bitcoins being ‘struck and what’s stopping them to flood the market?’

    And how tough would it be to counterfeit them?

    • kaiju

      The gold coins being shown by the news sites are fake. Bitcoins only exist as files in the internet cloud. No one knows where they are and no one backs them with anything of value. Do you see the problem now? It’s like the bubble of the Dotcons in the late nineties. People are buying something that doesn’t exist in hopes of getting rich quick.

      • nfcapitalist

        And where is this in the news… how little effort seems to be expended in meaningful and helpful information by those investigative reporters… but then I made a joke!

        • kaiju

          I was afraid you fell for the bitcoin scam. Don’t understand why OAN is putting these things on their site.

          • nfcapitalist

            No… not me.

            And yes, this article seems to be a warning for fools.

            Stock market and/or currency is seen as the only way to save (accumulate) potential in this disintegrating world of hackers and ones & zeros becoming the norm.

          • whoselineisitanyway

            OAN is a news site. At least they print all of the news. UNLIKE CNN, MSNBC, ABC, GOOGLE NEWS and countless others.

    • All American

      Not tough at all. Merely an algorithm! Several have been robbed too👍🏻