New Delhi, Dec 17 (PTI) Market watchdog Sebi will come down heavily on illicit 'initial coin offers' seeking public investments with promise of high returns from Bitcoins and other virtual currencies, amid a mushrooming of such schemes in the absence of any regulatory regime.

However, Sebi is not keen to take on the mantle of a regulator for such 'trading' -- currently being offered on a number of so-called exchanges despite there being no rules in this regard -- as the underlying product, which is Bitcoin or any such crypto currency, is not an approved product by RBI or any other agency, top officials said.

At the same time, Sebi cannot allow gullible investors to be taken for a ride with unlawful promises by these exchanges and those claiming to 'mint' crypto currencies. A number of them are suspected to be indulging in fraudulent activities without actually minting any such virtual currencies that require very complex algorithms, the officials noted.

A number of 'coin offerings' being made in India are nothing but fraudulent Ponzi or pyramid schemes, including some offering secondary trading in Bitcoins or other established virtual currencies, while many others are plain frauds without any such currency actually being in play, they added.

RBI has already made public its disapproval for all such currencies and has said it has not approved any of them, while tax authorities recently conducted searches at various exchanges and are believed to have collected information on lakhs of entities including HNIs who could have 'traded' there.

The regulators and government agencies are in a state of quandary as even imposing a tax would amount to giving a legal status to such currencies, for which any consensus remains elusive given the huge risks, including money laundering and terrorist financing, attached with such activities.

However, there is a kind of unanimity emerging about subjecting such trading to laws against black money, money laundering and frauds so that the interest of general public remains safeguarded, a senior official said, while adding that any final decision would be taken at highest level and a multi-regulatory panel may be assigned that job.

A gravity-defying bitcoin rally to over ₹ 10 lakh a unit, interspersed with 'stories' of people making crores from thousands, has left the regulators flummoxed.

The RBI has been issuing warnings since 2013, the first time when the surge in bitcoins caught the attention of Indians, but the risks have multiplied manifold now in the wake of a significant spurt in the valuation of many such virtual currencies and a rapid growth in Initial Coin Offerings (ICOs).

Modelled on the Initial Public Offers or IPOs for issuance of new shares in the stock market, some entities have begun resorting to ICOs to raise funds from investors, including HNIs and other individuals, who are getting lured into claims of huge returns from bitcoins and other such variants -- apparently getting minted in the digital world but also reaching the real world including as wedding gifts.

Illicit initial coin offerings targeted for enforcement to protect investors using fraud and anti money laundering laws. Regulatory authorities will target illicit initial coin offerings perceived as Ponzi, pyramid or fraudulent schemes and will apply anti fraud, anti money laundering and black money laws to protect investors; they will not confer legal status on unapproved virtual currencies or assume primary regulation of token trading, and a coordinated multi regulatory approach is contemplated following information gathering and enforcement actions at trading platforms.