Beware of ponzi schemes in cryptocurrency, as Bitcoin is now under SEBI lens

Bitcoin, a virtual currency, is not standardized in the country and its transmission has been a cause of affair among central bankers the world over quite some time now. The Reserve Bank of India has also given the high signs to users, holders, and traders of virtual currencies, including bitcoins. The Union finance ministry had established an Inter-Disciplinary Committee in March to take stock of the present status of VCs both in India and globally and suggest measures for dealing with such currencies.


“However, Sebi is not keen to take on the mantle of a regulator for such ‘trading’ — currently being offered on a number of so-called exchanges despite there being no rules in this regard — as the underlying product, which is Bitcoin or any such cryptocurrency, is not an approved product by RBI or any other agency, top officials told PTI. At the same time, Sebi cannot allow gullible investors to be taken for a ride with unlawful promises by these exchanges and those claiming to ‘mint’ cryptocurrencies. A number of them are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms, the officials noted. A number of ‘coin offerings’ being made in India are nothing but fraudulent Ponzi or pyramid schemes, including some offering secondary trading in Bitcoins or other established virtual currencies, while many others are plain frauds without any such currency actually being in play”, they added.


They conclude by saying, “Modelled on the Initial Public Offers or IPOs for issuance of new shares in the stock market, some entities have begun resorting to ICOs to raise funds from investors, including HNIs and other individuals, who are getting lured into claims of huge returns from bitcoins and other such variants — apparently getting minted in the digital world but also reaching the real world including as wedding gifts. The Income Tax Department last Tuesday conducted survey operations at major Bitcoin exchanges across the country on suspicion of alleged tax evasion even as Bitcoin has been touching new highs fuelling investor interest. Various teams of the sleuths of the department under the command of the Bengaluru investigation wing, today visited the premises of nine such exchanges in the country including in Delhi, Bengaluru, Hyderabad, Kochi, and Gurugram, since early morning. The survey, under section 133A of the Income Tax Act, was conducted for “gathering evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counterparties, related bank accounts used, among others.”