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India’s lack of regulation is helping ‘pyramid schemes with Bitcoin as their base,’ local startups are complaining.
India’s as yet unregulated cryptocurrency arena is giving rise to “Bitcoin-based pyramid schemes,” it is alleged.
As Livemint reports Monday citing local crypto startup spokespeople, “small-time traders are taking advantage of the absence of rules” to create “multi-level marketing (MLM) or pyramid-like schemes with Bitcoin as the base product.”
“People form companies that promise lucrative returns and indeed give them for the first few months,” Zebpay co-founder and chief executive officer Saurabh Agrawal told the publication.
“This is in exchange for bringing in more members under them who will buy Bitcoins and bring in newer members. This goes on till it explodes and the people lose all their money.”
While neither Agrawal nor fellow interviewee, Unocoin CEO Sathvik Vishwanath, explicitly named an example of such schemes allegedly operating in India, cryptocurrency’s legality in the country remains a problem.
A legislative vacuum is countered by frequent government and central bank warnings on supposed dangers of using Bitcoin and its ilk, these accompanying a currency crisis which after four months is still causing headaches for consumers.
Such mixed signals put India on par with jurisdictions such as Venezuela, where authorities have not banned cryptocurrency but appear to selectively penalize its operators.
Meanwhile, Monday, at last, saw cash withdrawal restrictions lifted in India as supplies of new banknotes slowly increase.
Zebpay and Unocoin are among the first local Indian Bitcoin exchanges. Both resources have seen marked increases in use since the currency reforms and recently announced a plan to self-regulate the market through their own association.
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