Crypto Law Set to Red-Flag Chit Fund, MLM Biz Models

Indians is set to red flag several investment schemes launched by individuals and cryptocurrency exchanges that are similar to chief funds, multilevel marketing (MLM) and systematic investment plans (SIP), as it seeks to build a robust regularly framework to protect vulnerable rural populations buying risky crypto assets.

Regulators including the reserve bank of India (RBI) and securities and exchanges 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 is crypto assets.

RBI has pointed out how some Indians have even starting accepting cryptocurrency payments for expert’s services, thus posing a broader systematic risk.

“it is observed that some individuals are going to small towns and raising money from people mainly is cash, with the promise of great returns in cryptocurrencies, “sad 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 scheme or chit funds have been floated to pool money for alleged investment in cryptocurrencies. 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 a start raising money,” said Siddharth Sogani, founder, CREBACO, a cryptocurrency research firms.

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