In this day and age of unrelenting hype around cryptocurrency, it is easy to lose sight of some basic facts. In this opinion piece in the Indian Express, Yogesh Gupta, formerly of the CBI and the Enforcement Directorate, reminds us of a coupe of straightforward facts around cryptocurrency.
Firstly, by no stretch of the imagination is it “currency” in any realistic sense of the word: “For any instrument to classify as a currency, it must have the following features: One, it is a promissory note wherein the issuer is promising the bearer or the holder a value. Two, it is backed by a sovereign nation and, therefore, there is never a question of any default in executing the promise. Three, the printing of currency in either physical or digital form is always based on some tangible asset, like gold or a basket of goods. From the above, it’s clear that cryptocurrency can never be a currency.”
Secondly, he explains that it not even an asset: “An asset is something that has a tangible value. Even if its immediate utility is intangible, an asset should have some tangible benefits. The cryptocurrencies being promoted currently — bitcoin, litecoin, ethereum — are nothing but gaming points. Whenever a discussion on cryptos takes place, promoters talk of blockchain technology. This technology is just a technique to account for transactions and has nothing to do with cryptocurrencies, except that the cryptocurrencies’ digital exchange is being maintained in blockchain format. In other words, the points which are earned through a gaming application are stored and transferred through blockchain technology. However absurd it may seem, even the points earned in a game of ludo can be presented as cryptocurrency if they are stored and sold by blockchain technology by the persons monetising these points. Therefore, cryptocurrencies have absolutely no value and cannot be considered an asset.”
Finally, he explains that much of what passes for crypto is actually criminal activity: “While working at the CBI and subsequently, the Enforcement Directorate, I had come across frauds like multi-marketing schemes, chit funds or deposit frauds. These schemes were disguised as timeshare schemes, gold and land investments, and promised hefty returns. These pyramid schemes were carried out over a long period to evade the law. Nevertheless, fraud could still be established, the trail of funds could be traced and the perpetrators identified.
Crypto promoters have taken fraud to another level with a little scope of their getting caught — as there is nothing that anyone is promising. One part is the persons or persons releasing the game or the equation from which bitcoins or cryptocurrencies are to be mined, the other is the exchanges through which these points — cryptocurrencies — are traded. These so-called cryptocurrencies have acceptability only as long as they are linked to the normal currency of a country. Unfortunately, millions are falling for this fraud globally. Criminals, particularly drug syndicates, will simply use the garb of crypto to siphon and launder their illegal proceeds.”
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