Encryption casts a shadow on Crypto adoption in India amid rising scams

Student Reporter, Jan 7, 2025, 7:32 PM IST

Representative image (credit: iStock)

Blockchain technology and end-to-end encryption have revolutionised the digital sphere in recent years. Many of us are already familiar with end-to-end encryption, a core feature of messaging applications like WhatsApp, which helps protect important data from fraudsters and data miners. Blockchain, on the other hand, is a decentralised, unchangeable ledger that records transactions. The decentralised nature of blockchain means no singular entity controls the system, making it difficult to trace.

While these innovations display promise, they also provide fertile grounds for financial fraud. As scammers exploit these technologies, unsuspecting investors fall victim to sophisticated schemes.

The advent of cryptocurrency and its rise has been met with mixed responses worldwide from regulators and legislators. In India, the adoption of cryptocurrencies and their future remain suspicious. George (name changed), a legal associate, explains, “Crypto is not legally recognised nor is it legally prohibited. It’s a very grey area,” highlighting this ambiguous nature of cryptocurrency. This lack of clear restrictions has allowed scammers to exploit unsuspecting investors without the fear of significant punishments.

The Federal Bureau of Investigation (FBI) released its annual Cryptocurrency Fraud Report FY 2023 in September 2024, highlighting the number of scams in India, amounting to $44,054,244 in losses. A Bengaluru-based techie was recently scammed for a whopping Rs 1.4 Cr through a telegram group.

Cryptocurrency scams have surged in India in the past few years, mainly through messaging platforms like Telegram and WhatsApp. The Telegram groups start by creating a channel and adding fake people to the group to show legitimacy. They further enhanced their trap with attached fake photos and instructions, said Sagnik Mukherjee, an MBA student and cryptocurrency trader based in Gujarat.

Blockchain technology’s anonymous and secure transactions make tracing individuals challenging, linking only to the final source.

Subhrojit Dey, an NFT collector and cryptocurrency trader, remarked, “Blockchain as a ledger is the best technology we can have to replace our currencies.” However, he explained the importance of users educating themselves. “Basic knowledge is crucial; avoid relying on Telegram for investment advice,” he advised. His experience with scams has led him to adopt stricter measures, such as using separate devices for cryptocurrency transactions to reduce risks. Sagnik also recommended URL-checking tools to guard against phishing attacks by fake websites.

The responsibility of preventing scams lies not only with individual users but also with messaging platforms and law enforcement agencies. Telegram’s refusal to share user details with government authorities “protects” scammers and “creates space” for more fraud, Sagnik pointed out. Telegram’s end-to-end encryption makes it difficult for authorities to monitor and address such discrepancies effectively. George noted, “You can’t restrict what you can communicate; that violates fundamental rights.”

Moreover, the Indian government has yet to implement comprehensive regulations addressing the problems posed by digital currencies. The current laws governing the whole space fall under the Information Technology (IT) Act, 2000, specifically under Sections 66 B, C, D, and E. Scammers can also be implicated under Section 318 of the Bharatiya Nyaya Sanhita, which deals with cheating. In 2021, the Union government proposed the Cryptocurrency and Regulation of Official Digital Currency Bill, which aimed to offer a framework.

Written by: Dibyaroop Ghosh, School of Communication and Media Studies, St Joseph’s University, Bengaluru