Indian Government Calles Cryptocurrencies Ponzi SchemesDecember 30, 2017
The stance of the financial officials of the Republic of India was always skeptical towards both bitcoin and other digital currencies. Now, it appears that the nation decided to further amplify the same message by providing a statement in which it is connecting all cryptocurrencies with Ponzi schemes.
This will be a certain blow to the developers from inside of the country and those who wish to see the India economy connect with the cryptocurrency industry. Even though there were a lot of low-key optimism that the nation might become involved in the same field, the end of 2017 apparently dampened most of these with the latest piece of digital currency news.
Here are the full details of the same statement. While it will have little or no relevance outside of India, the impact it might have on the nation’s economy will be showcased, along with an analysis who and why fuels this sentiment towards digital currency.
Ministry of Finance Statement
Many analysts defined the statement from the India’s Ministry of Finance as a way of doubling down on the cryptocurrency skepticism. Now, it has decided to warn its citizens against any association with the process of trading cryptocurrencies. To make things even more drastic, the same statement compared bitcoin and other blockchain assets to digital Ponzi schemes.
This statement is the third one the Indian government made in 2017 about digital currencies. This shows that the government is worried about the process of digital currency investment and how it is failing to undergo regulation requirements.
At the same time, there is a certainty that the government is trying to address the recent global phenomenon of price spikes and drops in the crypto markets. As these began occurring in the spring of 2017, a lot of individuals and investors began noticing the cryptocurrency potential, often with devastating consequences following bad investment decisions.
All this led to the statement in which virtual currencies and bitcoin, in particular, are described as entities that have an extreme level of price speculation. This leads to the high volatility and a potential for an investment bubble like those seen in Ponzi schemes.
The statement calls on the consumers to be extremely cautious and alert when they enter any kind of a business deal with these entities. This way, they should help themselves to avoid getting trapped in any kind of negative business arrangements.
The statement also underlined once again that the country does not recognize bitcoin or any other digital currency as legal tender. The same is true even though many individuals and even companies employ bitcoin on a regular basis. Its uses cover a wide range, from online betting to a means of attaining loans.
But, in spite of this, India has not even authorized any company to operate a cryptocurrency exchange. This is the reason why the users will be forced do bear any potential legal, operational, financial or security risks when they attain a cryptocurrency investment.
Of course, the same is basically true for any other user of digital currency in the world. In other words, no nation has so far provided the users any means of protection or regulation for this type of trading, with the exception of the recently launched futures products. But these only touch upon the cryptocurrency domain and those who buy them directly are still equally vulnerable in the US as they are in India or anywhere else.
The Indian Crypto Market
According to CoinMarketCap, India has a vibrant trading community for the crypto markets. Measurements from the biggest cryptocurrency exchange operating in the country, Koinex, the daily trading volume is usually around $115 million. This level is by no means a trivial one, even though India is one of the biggest nations in the world in terms of economic relevance.
Still, even though the warnings clearly do not favor the digital currency domain, many analysts see a silver lining in this piece of news. The very act that India is trying to define its stance on the digital currency is commendable, along with trying to protect its citizens.
While anyone can successfully argue that the digital currency is a huge bubble, many can lose a lot of money nonetheless. For developing nations, the issue of criminal or scam ventures is also an issue, so it would be foolish to expect or hope that the Indian government stays quiet about this.
This atmosphere is also the reason why India’s Supreme Court has asked the movement agencies to provide regulation of bitcoin. The court was responding to an online petition that asked for the same measures, showing a high level of public awareness of this issue.
Also, in August 2017, there was a proposal that was submitted to the Finance Ministry that was described as a regulation roadmap. However, both its timeline and content remain unclear, even though many suspect a restrictive approach to be in the works.
The Indian Economy Worries
One of the biggest focuses of the Indian Modi-led government so far has been the idea of trying to clean up the economy. This is related to both the micro and macroeconomic outlook and potential in the nation.
The same was the reason for one of the biggest shifts in the country when several big banknotes had been withdrawn from the circulation in an effort to stop “black money”. This term represents the funds of business entities that are not placed inside of the legal financial system, but in this case, kept in cash form until they are converted to some other currency and shipped outside of the country.
This is a form of a low-level offshore method of tax avoidance, but it clearly makes a big impact on the economy in the huge nation. Now, it is certain that many will perceive cryptocurrency as a new means for the same purpose, even though like eSports and other emerging digital ventures, it holds a lot of new economic growth opportunities.
Truth be told, the Chinese private business sector did the same thing to avoid the yuan devaluation some time back. But, hopefully, the government of India will also recognize the cryptocurrency potential to provide positive changes to the country’s economy.