Cryptocurrency is 'ponzi scheme', should be banned in India: Govt official

Cryptocurrency is a "ponzi scheme" and should be banned to protect the interest of investors, a government official said Friday. Amid continuing debates about cryptocurrencies such as Bitcoins, the Investor Education and Protection Fund (IEPF) Authority, which comes under the corporate affairs ministry, is in favour of banning trade in such currencies.

Cryptocurrencies are based on blockchain technology and there are concerns about its viability in the long-term and risk to investors, especially considering steep fluctuations in the prices.

These are digital units in which encryption techniques are used for trading and these currencies operate independently of a central bank.

"When it comes to investor protection, the IEPFA has to take a stand against certain things. Against ponzi schemes, we are taking a stand.

"We think that cryptocurrency is a ponzi scheme and it should be banned," IEPFA CEO Anurag Agarwal said.

Emphasising that it is the view of the IEPFA, Agarwal, also a Joint Secretary in the corporate affairs ministry, said the government would also take a stand on the issue.

While the government is yet to take a final call on whether cryptocurrencies should be banned or not, the Reserve Bank of India (RBI) last year tightened the rules to discourage use of such currencies.

IEPF Authority, set up under the Companies Act, 2013, primarily focuses on protecting the interest of investors. It also has powers to seek information from companies as well as initiate prosecution proceedings.

Agarwal said the authority plans to start gathering "primary data" from persons who have put in their money in chit funds and deposit-taking schemes. A mobile application, as well as an online platform for such investors, would be introduced in 10 days, he added.

Such a system would help in having an understanding about entities taking deposits as well as curb illicit money raising activities.