There are a lot of issues that the crypto industry needs to deal with. In fact, according to British watchdog, scams surrounding the market are on the rise. These are crypto scams that make use of celebrities and upmarket London addresses to duped consumers who provided cash.
Why are people attracted to cryptocurrencies? Despite the bearish 2018 for the crypto market, price swings are large and you will never know when the next bull-run is going to happen. What this means is that someone who made an investment could be cashing out double if not triple of what he or she invested in just a few weeks or months.
In 2017, Bitcoin started at around $1,000. The cryptocurrency by mid-December peaked at near $19,000. Given this possibility many are looking for quick profits even if they are not doing the necessary research to where they are investing.
The Financial Conduct Authority first gave this warning in June. Investment scams are on the rise promising of high returns. According to the FCA, “UK consumers are being increasingly targeted by cryptocurrency-related investment scams”. FCA also mentioned that “Cryptocurrency fraudsters tend t advertise on social media, often using the images of celebrities or well-known individuals to promote cryptocurrency investments”.
Once the victim is lured by the ad, it then links into a website wherein either crypto or traditional cash is going to be used. The FCA said that “The firms operating the scams are usually based outside the UK but will claim to have UK presence, often a prestigious City of London address”.
There is one problem though if you become a victim of this kind of fraud. For one, cryptocurrencies such as Bitcoin and Ethereum are not regulated and therefore you are not protected by the Financial Services Compensation Scheme.
This year, different countries had their different approaches when it comes to cryptocurrencies. You have countries that have completely banned crypto-related activities. On the other hand, there are those countries such as Malta that have welcomed many crypto startups and companies.
According to experts, regulatory clarity is needed in order to see cryptocurrency price to spike up once again. That’s because institutional investors are most likely only going to enter the market once they’ve made sure that their business isn’t going to be stopped by regulators at any given time.
Regulators from all over the world have been concerned about the possibility of scams and hacking incidences. In fact, Japan made the necessary changes in its regulations after hacking incidences occurred in their crypto exchanges. Today, Japan is implementing strict regulations on crypto exchanges not to mention banning cryptocurrencies that offer anonymity to its users.
Scams are Becoming Common
Given the number of people interested in investing in cryptocurrencies, it isn’t surprising that there are scams. 1 in every 5 ICOs is considered scams. In addition to this, even the likes of Ripple is facing lawsuits from its investors claiming that the XRP is a security. It only means that you should be extra careful if you plan on investing in any blockchain related business or crypto.