Four times return over traditional fixed deposits! That was the advertisement of a cryptocurrency exchange, which blared on the TV screens over the last weekend.

I have been deluged with so many investor queries on this scheme. Any scheme which lures investors with high returns, to me is a Ponzi scheme.

Here are 10 reasons why you should stay away from such schemes :

1) This is not a fixed deposit but a lending product. An investor who is holding cryptocurrency can choose to lend the holding in return for interest. Investing in a fixed deposit and lending your money has totally different ramifications and cannot be equated. So, stop thinking of this akin to a bank fixed deposit.

2) The investors who are lending do not know the profile of the borrower. Would you want to lend money to an unknown person?

3) Like cryptocurrencies, these so called fixed deposits are not regulated by RBI, which means there is no investor protection or any regulatory body overlooking these platforms. Banks and non-banking financial companies (NBFCs) have many regulations to follow, which are not applicable to cryptocurrency platforms.

4) Interest on the cryptocurrency fixed income product is received in form of coins and not as a credit in your account. This means the interest will also be subject to the volatility cryptocurrencies have and unless you sell the holding, you are not making real money.

5) Some platforms do not allow early liquidation or have limits on early withdrawal.

6) Each platform has its own rules of interest calculation, lock in period etc. Unlike bank fixed deposits, there are no standardized rules being followed. This is not in investor interest.

7) The platforms carry a risk of being subject to a hacking attack. Recent reports suggest that the use of cryptocurrency for money laundering is rapidly gaining acceptance worldwide.

8) Most platforms do not have any pedigree or experience and are trying to become shadow banks. Investors are scared of losing money in mutual funds managed by experienced and pedigreed fund managers but happy to invest into these fixed income products because of the higher returns. Why not, invest with a moneylender then?

9) A vast majority of people do not understand how cryptocurrency works and the risks associated. They are swayed by the exponential returns, but these returns will not continue forever. Always understand the risk in the product first over the return.

10) As an investor, how will you attach this to a financial goal. For example, if you invest into this product for a 6-month period for a specific goal and the crypto price tanks, do you have a plan B to manage the goal amount?

From time immemorial, people have been lured by high returning schemes and each time it is the investor who has lost out.

The platforms/ owners/stakeholders have minted money at the cost of the investor. This was seen in chit funds, plantation schemes, jewellery schemes and many more products.

Remember, there is no such thing as high returns without risk.

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