RBI Official Likens Crypto to ‘Ponzi Schemes’

Cryptocurrencies are like a pyramid scheme and should be banned in India, a deputy governor at the country’s central bank said Monday (Feb. 14).

As Reuters reported, these comments from T. Rabi Sankar followed an equally gloomy assessment of digital currencies from Reserve Bank of India (RBI) Governor Shaktikanta Das, which itself came after the Indian government set up a taxation framework for cryptocurrencies.

“We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity,” Sankar said in a speech. “They have no underlying cash flows, they have no intrinsic value … they are akin to Ponzi schemes, and may be even be worse.”

Learn more: RBI Supports a Full Ban on Cryptocurrencies in India

Last year, the RBI announced it had “serious concerns” about the stability and exchange management of cryptos, and also highlighted the challenge of regulating intangible currencies which originate outside the country.

“Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint,” RBI governor Shaktikanta Das has said. “As the central banker, we have serious concerns about it and we have flagged it many times.”

Read more: Crypto Coming to India with Digital Rupee, 30% Tax

But as Reuters notes, crypto exchanges and investors have been hopeful that no ban will happen following the Indian government’s recent announcement that it planned to tax gains from cryptocurrencies.

In a budget speech earlier this month Indian Finance Minister Nirmala Sitharaman announced the country would allow the transfer of digital assets, with a 30% tax on income from those transactions. Sitharaman also indicated that the RBI will launch a digital currency.

“It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23,” she said.

Sankar, however, dismissed the idea of regulating the virtual coins should be regulated and called for an outright ban.

“Cryptocurrencies are not currencies, or financial assets or real assets or even digital assets. Therefore, it cannot be regulated by any financial sector regulator,” he said. “It is not possible to regulate something that one cannot define.”