Enforcement Agencies May Bring Bitcoin Exchanges Under Scrutiny

Bitcoin platforms and exchanges may soon come under the scanner of enforcement agencies after the Indian government likened them to ‘Ponzi schemes’ recently. As per a LiveMint report, the bitcoin exchanges are set to be investigated for any attempts of illegal money-pooling.

“The Securities and Exchange Board of India (Sebi) can also take an action against such exchanges if they are serving as collective investment schemes,” the report added.

Just last week the Indian government issued a statement which stated that 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.

Emphasising the risk and illegality involved in Bitcoin trading, the finance department said in a recent statement, “Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes. VCs are stored in the 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.”

To be noted, it is for the first time, the Indian government has linked bitcoins to Ponzi schemes. Ponzi schemes are completely illegal, while Bitcoin and other cryptocurrencies were so far understood to belong to an uncharted territory, neither legal nor illegal.

It was also reported that Indian Bitcoin traders and their corresponding exchanges are now facing difficulties in digital payment. At times, the transactions are getting delayed by a day or more.

Also, earlier this month, the Bitcoin traders had been asked to attend the office of the IT department to produce the books of accounts or the documents including – details of investments done by the traders during FY 2015-16, 2016-1, and 2017-18 along with supporting documents. The Bitcoin traders had also been asked to provide the statements of all the bank accounts maintained by the HNIs personally, their family members and concerns associated with them.

As per reports, the bitcoin exchanges are ‘unhappy’ over the regulatory measures were taken by the Indian government on cryptocurrencies and has termed it as a ‘misunderstanding’ on the government side. Also, Bitcoin exchanges believe that it is wrong to characterize it as Ponzi scheme.

Although the Indian government or Reserve Bank has never authorised the cryptocurrencies transactions, a number of platforms are working in this direction, such as Coinsecure, Zebpay, Unocoin, bitxoxo, to name a few. In India, as the Bitcoin fever is catching up with over 2,500 users trading Bitcoin daily and the trading volume rising close to $20 Bn a year, cryptocurrency exchanges are mushrooming with each passing day.

The Indian cryptocurrency exchanges have also formed a foundation called Digital Asset and Blockchain Foundation of India (DABFI) which decides the exchanges’ stand on various issues such as hard-forks. Added to that, India is soon going to have its own digital cryptocurrency, Laxmicoin. The startup will be officially launched in 2018 now, and the ICO will start on March 31, 2018. Also, going ahead it is expected that  IT and ED departments can now closely watch even the ICO developments in the country.