Cryptocurrency — a digital form of currency designed to work as a medium of exchange — has gained significant attention in recent years. But there are fraudulent practices with cryptocurrency, which is legalized or accepted in more than fifty countries including the United Kingdom, Japan, Switzerland, Malta and Estonia and revolutionizing various industries including financial. According to multiple sources including the BBC, thousands of people who invested in a cryptocurrency trading app iEarn Bot are believed to have recently lost their savings. This is rendered one of the largest crypto scandals ever. Additionally, many others have fallen victim to the fraudsters of cryptocurrencies, including Bitcoin and Ethereum, in different countries, and lost millions of dollars, leading to a growing concern.
It is notable that one of the common fraudulent practices is the creation of fake initial coin offerings (ICOs), where scammers create a fake cryptocurrency project and offer potential investors to buy tokens that hold no real value. Additionally, Ponzi schemes, where investors are lured with promises of quick and easy profits but are paid with funds from new investors rather than actual profits and left empty-handed when the scheme inevitably collapses, and pump and dump schemes, where a group artificially inflates the price of a cryptocurrency before selling off their holdings that leave other investors with significant losses, are often noted fraudulent practices with cryptocurrencies. Among others, phishing attacks, where scammers send deceptive emails or create fake websites to trick users into revealing their private keys or login credentials, are another notable fraudulent practice with cryptocurrency in different countries.
There are definitely policy based, law-enforcement based and other steps to regulate the use of cryptocurrencies and prevent fraud in different countries. Regulatory bodies and governments are working towards establishing stricter regulations and oversight in the cryptocurrency market to deter fraudulent activities. In the United States, according to multiple sources, the Securities and Exchange Commission has classified certain cryptocurrencies as securities and requires crypto businesses to comply with relevant regulations. Some countries including Japan have implemented licensing requirements for cryptocurrency exchanges and wallet providers to ensure consumer protection and prevent money laundering. Among others, different countries have established dedicated units to respond to the growing number of crypto frauds and collaborate with international organizations and regulatory bodies to share information and coordinate efforts in tackling cross-border cryptocurrency scams.
But there is a lack of strong and effective regulatory oversight to prevent cryptocurrency fraud, driven by the lack of regulatory frameworks, implementing strict compliance measures and centralized authority to monitor and regulate cryptocurrency transactions, in different countries. Additionally, according to multiple sources, difficulty in identifying and attributing who the illicit actor is and where the value is going and taking appropriate investigative steps and effective law enforcement actions — driven by the decentralized nature of cryptocurrencies and the anonymity they provide — puts significant challenges to preventing fraudulent transactions and hold fraudsters accountable for their actions. Among others, the global nature of cryptocurrency transactions that makes it difficult to trace and prosecute offenders across different jurisdictions and a lack of awareness are notable challenges.
Fraudulent practices with cryptocurrency definitely need to be addressed. For this, effective regulatory and oversight measures are crucial in many countries. But it is crucial for governments and regulatory bodies to establish clear regulatory guidelines and enforce stricter regulatory measures to protect investors and users from fraudulent practices with cryptocurrency. Collaboration among cryptocurrency regulatory bodies, industry stakeholders and experts can help develop effective regulatory guidelines or strategies to detect and prevent fraudulent practices. Putting emphasis on regular audits may be helpful in ensuring transparency and accountability in cryptocurrency projects and companies in different countries. Cryptocurrency exchanges and platforms may help verify the identity of their users and monitor transactions for suspicious activities.
But imposing penalties on individuals or organizations found guilty of fraudulent activities in the cryptocurrency space and law-enforcement based efforts are also crucial to deter potential fraudsters from engaging in illegal practices. Cross-border collaboration may help bring fraudsters to justice, dismantle cryptocurrency fraud networks and prevent the globally growing cryptocurrency fraud. Notably, collaboration between European law enforcement agencies in 2021 resulted in the dismantling of an international network responsible for cryptocurrency fraud across multiple countries. It is also important to raise awareness about common fraud schemes to enable individuals to exercise caution, make informed decisions and avoid or reduce the risk of falling victim to fraudulent schemes.
