NEW DELHI: As part of its efforts to build a robust regulatory framework to protect vulnerable rural populations buying risky crypto assets, India is set to restrain several investment schemes launched by individuals and cryptocurrency exchanges that are similar to chit funds, Multi-Level Marketing (MLM), and Systematic Investment Plans (SIP).
Regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have expressed concerns to a parliamentary panel about how certain small-town investors are collecting money with the purpose of investing in crypto assets using business models similar to chit funds.
The Reserve Bank of India has noted that some Indians have begun accepting bitcoin payments for export services, suggesting a greater systemic risk.
According to reports, regulators have identified cases in the hinterlands, particularly in Uttar Pradesh and Bihar, where collective investment schemes or chit funds have been set up to combine money for suspected cryptocurrency investments. The panel of central lawmakers has also heard from crytocurrency exchanges and affiliated organisations.
Insiders warn that some unregulated firms are promoting MLM-like schemes in addition to chit funds. “Smart contracts are driving a lot of frauds in India,” said Siddharth Sogani, founder of CREBACO, a cryptocurrency research business. “Anyone can develop their own coin and start soliciting money”, said, Sogani.
The decision to present the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, in the winter session of Parliament has investors concerned. Following the publication of the Lok Sabha bulletin last week, both investors and venture capitalists expressed caution.