Cryptocurrency is equivalent to Ponzi scheme: RBI Deputy Governor

Raising concerns over cryptocurrencies, RBI deputy Governor T. Rabi Shankar called it equivalent to “Ponzi scheme” or even “worse”. He said that banning these is “perhaps the most advisable choice open to India”. 

In a banking conference, Shankar said that 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 even be worse.” 

Shankar pointed out that “crypto-technology is underpinned by a philosophy to evade government controls.” He further said, “Cryptocurrencies have specifically been developed to bypass the regulated financial system.” 

Sankar’s remarks correspond to the direction of the government’s move of taxing income incurred from cryptocurrencies and NFT transactions, announced in the central budget on 1 February.   

India has registered the second-highest adoption of cryptocurrency investments, according to a Chainalysis report. 

The increasing adoption of cryptocurrencies has led to the concern of RBI over money laundering, terrorist funding and diminishing household savings. 

“There’s been a phenomenal increase in transaction in virtual digital assets,” said Nirmala Sitharaman, in her budget speech. “The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.” 

Sitharaman proposed a 30% tax on digital assets incurred. Additionally, one per cent tax deduction at source is to be levied on every digital asset transactions.