Regulators including the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) have raised concerns before a parliamentary panel about how some individual investors are collecting money in small towns – with business models resembling those of chit funds – for investing in crypto assets.
RBI has pointed out how some Indians have even started accepting cryptocurrency payments for export services, thus posing a broader systemic risk.
“It is observed that some individuals are going to small towns and raising money from people, mainly in cash, with the promise of great returns in cryptocurrencies,” said a person familiar with the representations to central lawmakers. “This is exactly like chit funds, but without any framework or regulations.”
Regulators have reportedly flagged instances in the hinterland, particularly in Uttar Pradesh and Bihar, where collective investment schemes or chit funds have been floated to pool money for alleged investments in cryptocurrencies. Crypto exchanges and related associations have also made representations to the panel of central lawmakers. Officials at Sebi and RBI could not immediately be reached for comments.
Besides chit funds, even MLM-like schemes are being promoted by some unregulated entities, warn insiders. “In India, a lot of scams are driven by smart contracts – anyone can launch their own coin and start raising money,” said Siddharth Sogani, founder, CREBACO, a cryptocurrency research firm.
Scam Schemes
“There is one scam every week in India where fraudsters are trying to do a multi-level-marketing or collective investment scheme, which promises astronomical returns to…
