Investing in cryptocurrencies has recently gained popularity. Let us first distinguish between a cryptocurrency and an asset when discussing a crypto investment. Any instrument wishing to be classified as a currency must have the following characteristics: A promissory note is one type in which the issuer promises a sum of money to the bearer or holder. Second, because it is backed by a sovereign nation, there is no risk of the promise not being fulfilled. Three, currency printing, whether physical or digital, is always based on some tangible asset, such as gold or a basket of goods.
Based on the preceding, it is obvious that cryptocurrency will never be a currency.
Can cryptocurrency then be considered an asset? A monetary asset is something that has monetary value. Even if an asset’s immediate utility is intangible, it should have some tangible benefits. The cryptocurrencies that are currently being promoted — bitcoin, litecoin, and ethereum — are simply virtual currencies. Promoters bring up blockchain technology whenever there is a discussion about cryptos. This technology is merely a method of accounting for transactions and has nothing to do with cryptocurrencies, except that the digital exchange of cryptocurrencies is kept in blockchain format. In other words, using blockchain technology, points earned through a gaming app are saved and transferred.
Even the points earned in a game of ludo, however absurd it may appear, can be presented as cryptocurrency if they are stored and sold by the people who monetize these points using blockchain technology.
As a result, cryptocurrencies have no monetary value and cannot be considered assets. Mining and calculating the nth root of an equation are both euphemisms for earning gaming points.
I encountered frauds such as multi-level marketing schemes, chit funds, and deposit frauds while working for the CBI and then the Enforcement Directorate. These schemes pretended to be timeshare schemes, gold and land investments, and promised high returns. These pyramid schemes were carried out over a long period of time in order to avoid the law. Nonetheless, fraud could be established, a money trail followed, and the perpetrators identified.
Crypto promoters have taken fraud to new heights, with little chance of detection because no one is promising anything. The first is the individual or individuals who publish the game or equation from which bitcoins or cryptocurrencies are to be mined, and the second is the exchanges where these points — cryptocurrencies — are traded. These cryptocurrencies are only acceptable if they are linked to a country’s regular currency. Unfortunately, millions of people all over the world are falling victim to this scam. Criminals, particularly drug cartels, will simply syphon and launder their illicit proceeds under the guise of cryptocurrency.
Congratulations to RBI Governor Shaktikanta Das for being the first central bank leader to raise the issue. It is also commendable that the government moved quickly to pass legislation prohibiting and regulating cryptocurrency transactions. India is a democracy in which the government and the opposition collaborate on national issues.
Cryptocurrency’s recent aggressive promotion in print and visual media may be their undoing. It will only be a matter of time before financial fraud prevention and enforcement agencies such as the CBI and ED catch up with them. Millions of people, on the other hand, could have lost their hard-earned money by then. Indeed, advertisements and promotional activities may play an important role in connecting people to this fraud. As a result of the impending ban and investigation into cryptocurrency transactions, supporters have coined a new term: non-fungible tokens, or NFTs.
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