Today, on 29th DEC 2017 at 9:55AM, PIB had published a Press Release about VC’s.
Bitcoin Referred to as PONZI SCHEME by Govt Of India
The Ministry of Finance has issued the following statement today on Virtual ‘Currencies’.
“There has been a phenomenal increase in recent times in the price of Virtual ‘Currencies’ (VCs) including Bitcoin, in India and globally. The VCs don’t have any intrinsic value and are not backed by any kind of assets. The price of Bitcoin and other VCs therefore is entirely a matter of mere speculation resulting in spurt and volatility in their prices. There is a real and heightened risk of investment bubble of the type seen in ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money. Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes. VCs are stored in digital/electronic format, making them vulnerable to hacking, loss of password, malware attack etc. which may also result in permanent loss of money. As transactions of VCs are encrypted they are also likely being used to carry out illegal/subversive activities, such as, terror-funding, smuggling, drug trafficking and other money-laundering Acts.
VCs are not backed by Government fiat. These are also not legal tender. Hence, VCs are not currencies. These are also being described as ‘Coins’. There is however no physical attribute to these coins. Therefore, Virtual ‘Currencies’ (VCs) are neither currencies nor coins. The Government or Reserve Bank of India has not authorised any VCs as a medium of exchange. Further, the Government or any other regulator in India has not given license to any agency for working as exchange or any other kind of intermediary for any VC. Persons dealing in them must consider these facts and beware of the risks involved in dealing in VCs.
The users, holders and traders of VCs have already been cautioned three times, in December, 2013, February, 2017 and December, 2017, by Reserve Bank of India about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to by investing in Bitcoin and/ or other VCs. RBI has also clarified that it has not given any licence/ authorization to any entity/ company to operate such schemes or deal with Bitcoin or any virtual currency. The Government also makes it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants therefore deal with these VCs entirely at their risk and should best avoid participating therein.”
So, Here comes the Question is Bitcoin really a Ponzi Scheme?
Let's have a look.
Is Bitcoin Ponzi Scheme?
People who don’t fully understand what Cryptocurrencies are and see them more as some form of “imaginary money” are inclined to make unflattering comparisons between Bitcoin and ponzi schemes. Many countries and central banks have issued warnings on the crypto-currency and attacked it using this allegation with little substantiation. A few simple tests and closer examination will reveal whether there is any truth in such accusations.
AltcoinsThe interest towards Bitcoin became immense during the past year. As it is decentralized, promotes libertarian ideas and aims to help people, the virtual asset hardly matches traditional principles behind fiat currencies. It simply breaks crusty and outdated rules.
A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers.
Generally, a ponzi scheme is a fraudulent investment process, where the responsible person or organization pays out dividends from new investments, because no profit has been earned. The money collected is not completing any work, being simply collected for an idea.
Charles PonziThe operation was named after Charles Ponzi, who was first in 1920 to create such an investment initiative on the arbitrage of international reply coupons for postage stamps. It did not last long proving the futility of the criminal activity.
Being too alternative, too interesting, progressive and relevant to changes, Bitcoin scares conservatives who either do not understand it or fear its implications. Skeptics doubt its origins, claim it to be the invention of one or another government trying to shake the leading global currencies like the US dollar, and even accuse it being a ponzi scheme.
Today, the government also made it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants therefore deal with such currency entirely at their risk.
The Income Tax Department had recently conducted survey operations at major Bitcoin exchanges across the country on alleged suspicion of tax evasion. They said various teams, under the command of the Bengaluru investigation wing, visited the premises of nine such exchanges in the country including in Delhi, Bengaluru, Hyderabad, Kochi and Gurugram.
Further, the Securities and Exchange Board of India (SEBI) intends to crack down on schemes such as so-called initial coin offerings that take advantage of investors who have little understanding of the risks of investing in such cryptocurrency ventures and those who are running outright fraudulent operations.
The absurdity of most of these claims speaks for itself. Only the ponzi scheme is a burden to be dropped off with sufficient analysis and strong proof. Currently, the value of Bitcoin is around $14,464.40.
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