Jim Yong Kim, the president of the World Bank, said the vast majority of cryptocurrencies are basically Ponzi Schemes, Bloomberg reported. Speaking at an event in Washington on Wednesday, Kim said it was still not clear how these would work.
However, he expressed hope that the blockchain technology, which underlies Bitcoin, could be used to track aid in developed countries more effectively and reduce corruption. The blockchain is a platform that uses distributed ledgers to allow digital assets to be traded securely.
The blockchain technology that is underlying bitcoin has found greater acceptance in fields beyond finance such as pharma, government services, and even in distributing aid to refugees.
The Dubai government has made a roadmap to embrace blockchain on a large scale to realize the dream of a paperless and cashless society by 2020. The city plans to launch its own crypocurrency emCash.
Kim is not the first person to compare cryptocurrencies to Ponzi schemes. The head of the Bank for International Settlements or BIS, Augustin Carstens, said earlier in the week that while digital currency is perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, Ponzi scheme, and an environmental disaster.
Incidentally, Bitcoin plunged to its lowest price in three-months early this week. The currency lost two third of its value, from a record high price of $19,511 it reached six weeks ago. As of 7.16 am ET on Friday, Bitcoin was up 0.22 percent at $8,256 as per CoinDesk's Bitcoin Price Index.
The price crash on fears of potential crackdown in two leading markets, South Korea and China, has left many doubting if the cryptocurrency bubble has indeed burst.
Another personality, who compared Bitcoin to Ponzi schemes was Hong Kong-based independent stock commentator and shareholder activist David Webb, who had said in December, "Bitcoin is the world's first decentralised Ponzi scheme without any operator."
In mid-January, controversial cryptocurrency Bitconnect Coin, which was suspected of being a Ponzi scheme, announced that it was shutting down its lending and exchange platform. The digital currency's price plummeted more than 90 percent in response to the news.
The U.S. Commodity Futures Trading Commission had filed charges in late January in a federal court against a Nevada-based firm and two persons associated with it for misappropriating $6 million by running a ponzi scheme. The scheme was disguised as a solicitation for buying a virtual currency called My Big Coin, or MBC.
In India, the Income Tax Department had inspected Bitcoin exchanges, and the Reserve Bank issued warnings against cryptocurrency dealings. Cryptocurrencies are not yet a legal tender in India.
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