India’s Finance Minister Warns Of Bitcoin ‘Ponzi Scheme’

The latest in a growing chorus of regulators all over the world, India’s finance minister has joined the list this week in decrying bitcoin trading (and other associated cryptocurrencies), claiming that it is, at base, the same as buying into a Ponzi Scheme.

Cryptocurrencies are not legal tender, the finance ministry noted in a statement, and as such offer users absolutely no governmental protections. Investors and other participants in the digital currency world do so “entirely at their risk and should best avoid participating therein,” the statement said.

The warning, while strongly worded, stopped short of announcing an outright ban or imposing any curbs.

But despite avoiding a ban — the concern is clearly fairly pressing.

“There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes,” the statement noted — particularly in how bitcoin, like Ponzi schemes, is always vulnerable to a big unexpected crash. Moreover, the finance ministry noted, the use cases for cryptocurrencies like bitcoin are largely illegal. Bitcoin, it noted, is especially useful if one wants to do a whole list of legally verbotten activities: “terror-funding, smuggling, drug trafficking and other money laundering acts.”

But despite its hesitations, India has not banned bitcoin — a move that some think is a mistake.

“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.”

India’s capital market regulator has confirmed that his office is in talks with the government and central bank on how to regulate cryptocurrencies.

That would put India in the company of South Korea, where officials announced their plan to impose additional measures to regulate speculation in cryptocurrency.


Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.


To Top