Sebi gets whiff of bitcoin scam

Market watchdog Sebi will come down heavily on illicit "initial coin offers" seeking public investments with the promise of high returns from bitcoins and other virtual currencies, amid a mushrooming of such schemes in the absence of any regulatory regime.

  • Published 18.12.17
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New Delhi: Market watchdog Sebi will come down heavily on illicit "initial coin offers" seeking public investments with the promise of high returns from bitcoins and other virtual currencies, amid a mushrooming of such schemes in the absence of any regulatory regime.

It also rules out the possibility of Sebi taking on the mantle of a regulator for such "trading" - currently being offered on a number of so-called exchanges despite there being no rules in this regard - as the underlying product, which is Bitcoin or any such crypto currency, is not approved by the RBI or any other agency, officials said.

At the same time, Sebi cannot allow gullible investors to be taken for a ride with unlawful promises by these exchanges and those claiming to "mint" crypto currencies. A number of them are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms.

A number of "coin offerings" being made in India are nothing but fraudulent Ponzi or pyramid schemes, including some offering secondary trading in Bitcoins or other virtual currencies, while many others are plain frauds without any such currency being in play, they added.

The RBI has already made public its disapproval for all such currencies and has said it has not approved any of them, while tax authorities recently conducted searches at various exchanges and are believed to have collected information on lakhs of entities including HNIs who could have "traded" there.

There is unanimity emerging about subjecting such trading to laws against black money, money laundering and frauds, a senior official said.

A gravity-defying bitcoin rally to over Rs 10 lakh a unit, interspersed with "stories" of people making crores from thousands, has left the regulators flummoxed.

The RBI has been issuing warnings since 2013, but the risks have multiplied manifold now in the wake of a significant spurt in the valuation of many such virtual currencies and a rapid growth in Initial Coin Offerings (ICOs).

Modelled on the Initial Public Offers or IPOs for issuance of new shares in the stock market, some entities have begun resorting to ICOs to raise funds from investors, including HNIs and other individuals, who are getting lured into claims of huge returns from bitcoins and other such variants - apparently getting minted in the digital world but also reaching the real world including as wedding gifts.

US trading

Bitcoins trading in the US tool a giant leap on Sunday when CME Group, the world's top derivatives exchange, launches its bitcoins futures, a week after rival CBOE Global launched its own products. PTI

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