While addressing the Indian Banks’ Association on Monday, February 14, Reserve Bank of India (RBI) deputy governor T. Rabi Sankar said that cryptocurrencies are akin to Ponzi schemes or even worse, and banning them is the most sensible option for India.
“We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows; they have no intrinsic value; that they are akin to Ponzi schemes, and may be even be worse,” he said in a speech.
But are cryptocurrencies really Ponzi schemes? Let’s hear from the experts
What Are Ponzi Schemes?
A Ponzi scheme is a fraudulent investing scam that promises high rates of return with little risk to investors. The term owes its origin to a swindler named Charles Ponzi, who made his name in 1920. However, the first recorded examples of this sort of investment scam can be traced back to the mid-to-late 1800s to Adele Spitzeder in Germany and Sarah Howe in the US.
A Ponzi scheme is an investment fraud in which clients are promised a large profit at little to no risk. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. These are generally multi-level marketing schemes, in which money from new investors is used to pay ‘profits’ to earlier investors. This continues till new investors keep joining.
Multi-level marketing itself is not illegal in India…
