By HEIN KO SOE and THOMAS KEAN | FRONTIER
YANGON — The Ministry of Home Affairs has warned against the trading of cryptocurrencies including Bitcoin, following a wave of scams and the use of dubious marketing strategies to lure naïve investors.
The ministry issued a statement yesterday warning that cryptocurrencies were “unstable” and those interested should only study them, and not invest. It said coin promoters often targeted people in rural areas who had little knowledge of the complex products they were buying. In some cases they are employing multi-level marketing tactics, it said, whereby those who attract new investors earn a commission.
“Cryptocurrency companies that were based outside Myanmar have started operating inside Myanmar,” the statement said. “They have mostly focused on attracting investors in rural areas who have no experience or understanding about cryptocurrencies.
“These groups are attracting people to invest in cryptocurrency platforms using incentives. Digital currencies … are unstable and if anyone in Myanmar invests in them it may affect to country economy. So people should only study about cryptocurrencies.”
Cryptocurrencies are virtual or digital currencies that do not exist in a physical form. Control is decentralised – there’s no central bank or Federal Reserve – and they typically employ blockchain technology, under which all transactions are recorded on an encrypted public ledger.
The first and most well known cryptocurrency is Bitcoin, which launched in January 2009. Interest in Bitcoin has grown in line with its price, which rose from US$45 in 2012 to almost $20,000 in December 2017. Since then it has fallen by more than half, to around $9,000.
Bitcoin’s fame has prompted a wave of cryptocurrency developers to stage initial coin offerings, and there are now thought to be upwards of 1,000 cryptocurrencies.
However the popularity of the coins has seen it attract a large number of scammers, some of whom use a cryptocurrency façade to attract investors into Ponzi schemes.
“Because the price of Bitcoin has risen higher and higher … other types of coin currencies are emerging,” the statement said, adding that investors were not carefully analysing these coins before putting money into them.
In January, Frontier reported that multi-level marketing leaders in Myanmar were promoting a product called FirstCoin Club, under which investors could put in from $200 and earn a guaranteed 3 percent to 7.5 percent return per month, and noted that it had the characteristics of a Ponzi.
In February, FirstCoin was delisted from the LiveCoin exchange based on requests from “police authorities in at least two countries”. After hitting a high of $18.22 in December, the cryptocurrency was yesterday trading at just 1.7 cents.
The authorities have already started to take action against cryptocurrency trading platforms that have allegedly been operating in Myanmar without a licence. In March, the managing director of the Myanmar branch of FBS, a foreign exchange trading platform, was arrested and remanded to Insein Prison for allegedly running a financial institution without a licence.
Officials from the Ministry of Home Affairs and the Bureau of Special Investigations, its economic crime-fighting force, declined to comment to Frontier.
In early 2017, the Ministry of Home Affairs began investigating the multi-level marketing industry after receiving a large number of complaints of illegal activity. However, it is unclear whether the scope of the investigation has been expanded to cryptocurrencies.