Bitcoin, a cryptocurrency that has increasingly gained prominence in the mainstream as a transactional decentralized global currency and a store of value for investors, has predictably seen a marked increase in bitcoin-based scams by fraudsters.

An unnamed senior Indian crime branch officer has stated that criminal cases of fraud related to bitcoin are on the rise as bitcoin gains popularity in the country.

Indians had to persevere through a significant and unprecedented demonetization run enforced by the country’s central government, a move which saw 87% of the country’s physical cash in circulation rendered obsolete on November 8, 2016. In the immediate aftermath of the event, demand for bitcoin soared as a currency immune from the controls of the government as Indians purchased bitcoin at a premium of up to 20% within days of the demonetization. Interest in the cryptocurrency was never higher, as Indians explored ways to buy bitcoin.

Within 3 weeks of the cash crunch, Indians were buying bitcoin at a premium of 35% from local bitcoin exchanges. Elsewhere, the country’s citizens were trading bitcoin in a peer-to-peer (P2P) manner, pushing decentralized trading to all-time highs. A month after the demonetization’s announcement, the surge in bitcoin adopters in India was entirely evident.

Inevitable Fraud

In early December, the city of Lucknow, in Northern India, saw its first official case involving bitcoin fraud, wherein a P2P bitcoin trade went awry.

As reported by India Today, another case of bitcoin fraud came to light last week when a businessman in the country’s capital of Delhi lost ₹850,000 (approx. $12,750) to an alleged bitcoin miner, who promised returns on investment with the cryptocurrency. The businessman did not file a police complaint, however, since digital currencies aren’t recognized by the country’s central bank. The Reserve Bank of India issued a public notice last month, reminding users that the cryptocurrency or businesses-related to it aren’t authorized and aren’t subjected to consumer protection laws.

The lack of regulation and acknowledgment of bitcoin, which is attracting investors in India, is leading to an increase in fraud related to the cryptocurrency.

Speaking to the publication, a senior crime branch officer stated:

Cases of fraud related to bitcoins are becoming more frequent. [Bitcoin’s increasing popularity and acceptance around the world] has attracted many new investors. However, cashing on its rising popularity, some scamsters are also running fraud set-ups.

Authorities Ignore Bitcoin

The situation if further exacerbated with the commonly accepted notion that India’s central bank isn’t likely to permit bitcoin as legal tender, despite its agenda to embrace digital payments and financial technologies. A new “Payments Regulatory Board” installed by the Reserve Bank of India that will oversee and handle digital payment gateways that have become hugely popular in India post-demonetization, will not be including bitcoin under a revised set of Fintech-friendly regulations.

The lack of involvement by the RBI has led to companies from India’s young but growing bitcoin industry to unite and launch a self-regulatory body last month.

Indian authorities’ shunning of bitcoin comes at a time when other Asian countries including Japan and the Philippines move toward regulating the bitcoin industry locally.

The appetite for bitcoin among Indians is only going to increase in a country with one of the world’s youngest populations pushing soaring adoption rates of smartphones with the world’s cheapest rates for telecommunications and mobile internet access.

The senior crime branch official adds:

After demonetization in November 2016, demands for bitcoin have gone up in the country and what gold was to the previous generation, bitcoin is to today’s tech-savvy investor.

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