New Delhi: Virtual currencies such as bitcoin and other cryptocurrencies, allegedly often used for terror financing or in the illegal drug trade, are a ponzi scheme and should be banned, a senior government official said on Friday.
“Cryptocurrency is a ponzi scheme and it should be banned. This is the view of the IEPF (Investor Education and Protection Fund) authority and we want the government to take a stand on it. By not taking a decision, we are harming investors," said Anurag Agarwal, joint secretary in the ministry of corporate affairs.
IEPF comes under the administrative control of the corporate affairs ministry and was set up to facilitate refund of shares, unclaimed dividends and matured debentures to investors and promote awareness among them.
Currently, there is no government or Reserve Bank of India (RBI) guidelines on virtual currencies.
However, the central bank as well as the government have time and again warned against the use of cryptocurrencies.
In December 2017, the finance ministry said that virtual currencies are neither currencies nor coins and are not authorized by the RBI and the government as a medium of exchange. These do not have any regulatory permission or protection in India.
“The virtual currencies don’t have any intrinsic value and are not backed by any kind of assets. The prices of bitcoin and other virtual currencies, therefore, are entirely a matter of mere speculation. There is a real and heightened risk of an investment bubble of the type seen in ponzi schemes that can result in a sudden and prolonged crash," the finance ministry had said in a statement.
Last year, the central bank prohibited regulated entities, including commercial banks, payments banks and small finance banks from dealing with or providing services to facilitate trade in virtual currencies.
Besides, the government had last year also formed a panel headed by finance secretary Subhash Chandra Garg to finalise a report on draft regulations on cryptocurrencies. The government is yet to finalise the report and make it public.