Bitcoin Ponzi Schemes A Concern In India
A government skeptical about Bitcoin – it’s not a new story but it is a new twist when Big Brother is more worried about the scams built around the digital currency. Indian authorities have recently jumped on the anti-Bitcoin wagon but not entirely for the same reasons that many of other governments are riding along.
It is not about the lack of regulation around its use and trade and the concerns about citizens investing into a volatile vehicle. Nor is it about the dangers of money laundering syndicates. Of course, these are points to ponder and worry about for any government. India included. But the Indian government has expressed its concerns around the ponzi schemes that may flourish around the Bitcoin revolution.
Yes, ponzi as in Bernie Madoff ponzi scheme. These days it is being referred to as e-ponzi. Despite the changes in certain mediums like the internet, the principle is the same. Multi-level marketing schemes and pyramid schemes are the other more polite terms. But it is essentially a scam based on the same model and dressed up to look different.
Bitcoin Pyramid Scheme
Here is how it works in India and in just about every other country for that matter. The average Joe is brought in to invest in an opportunity that is too good to pass up. He/she can increase their return by getting more people to sign up – friends, family, colleagues or even strangers that they recruit. The catch is that money is constantly being juggled around and those at the top earn from the capital invested by those lower down.
Eventually the scheme will fall and while a small number of people right at the top may have made their money, those lower down would have lost their entire capital. The consequences can be deadly. India has highlighted these schemes as its biggest concerns relating to cryptocurrencies.
It may be the Bitcoin system itself that is seen as the ponzi scheme or ‘elite’ groups of individuals who band together to buy Bitcoin that are the problem. What is clear is that innocent people are losing their hard earned money. Many are people with limited resources who have sacrificed their homes, kid’s education funds and retirement to invest into the scheme. Sometimes their entire inheritance, salary or pension fund is quickly gone. Chances of recovery – slim.
India is not as yet regulating or banning Bitcoin, but it is keeping a close eye on it. Government officials say that warnings will be issued informing consumers about the pros and cons of the digital currency revolution. As with any scam, some of these Bitcoin schemes seem quite legitimate and unsuspecting consumers will quickly jump on the bandwagon, often forking out more than they can afford to lose.
The problem is that people are investing in Bitcoin. They are seeing it as an investment vehicle rather than the alternative currency it was intended to be. The price fluctuates drastically at times and the return is never guaranteed. There are hopes of making more money than they could through their current path in life.
The promise that the scheme will offer the investor a better life. It never happens. At least not for the majority of investors.