Opinion: Cryptocurrencies have become a playground for fraudsters

By    28 Dec,2022

While this call is welcome, it is not just about making rules, but how those rules are monitored and enforced that will affect bad behavior and improve market confidence.

Proponents of the industry are trying to attract users through the "disruptive" and "Wild West" nature of the crypto space, but it is this very nature that makes it so attractive to scammers and thieves. Cryptocurrencies remain largely untouched by global financial regulation, making them a safe haven for criminals and putting investors at risk with little to no remedy if they fall victim to crime.

Banks are moving away from, rather than towards, the crypto market. starling Bank recently announced that they will impose restrictions on their customers' crypto activities, which could drive crypto investors towards less secure trading channels.

Cryptocurrencies and blockchain have been labeled as disruptive technologies operating in a decentralized space. Within these parameters, it seems unwise to complain about the processes of the traditional financial system, which many criminals try to evade.

There is a need for external education, but also for self-control on the part of users. As commentator and IBC Group founder Mario Nawfal tweeted in November, "Everyone is asking me how we didn't miss the FTX scam. It's simple: greed. All of us were making money and none of us considered proper due diligence. We all followed each other like sheep, trying not to be the fool who missed out. We're paying our dues now."

Crypto trading should be viewed not just as an extension of online gaming, but as a serious financial option with real and risky consequences. The gamification of cryptocurrencies has been achieved through the viral spread of cryptocurrencies and non-homogenized tokens (NFTs) on social media, with celebrity endorsements and influencer outreach normalizing the culture with little regard for the possible negative consequences of investing. Young investors are bombarded with puff pieces of absurd stories of how their peers have made jaw-dropping returns from small investments, and they are easily duped into putting their money into the next get-rich-quick scheme that is put in front of them.

Once the preserve of banking institutions, governments and funds, currency speculation has been repackaged and sold to the masses as casino entertainment, and its rapid growth shows how successful the makeover has been. The perfect storm has formed, capitalizing on crude social media broadcasts, the fog of little-known cryptocurrency technology, and the kind of wild price swings that dared investors to dream. Greed, technological advances, and lack of regulation remain destructive. Fraud is currently the price of cryptocurrency trading, and there is a long way to go to prevent history from repeating itself.

If exchanges handle customer funds, then they must operate and be regulated like banks to protect consumers and provide proper guarantees to properly segregate and protect deposits.

Cryptocurrencies should be subject to some form of centralized authentication process so that investors are fully aware of the risks involved in their investments. Tokens would need to have minimum standards and guarantees in order to be certified. Consumers will then have a clear view and can make an informed choice.

The issuance of tokens also needs to be considered and, in order for regulation to make sense, needs to be comparable to the minimum standards for initial public offerings.

Valuation remains an issue. Companies issue tokens whose value is based on the outlook/value of the company and therefore included in the value of its own stock. the value of FTX is supported by the market value of its token FTT, which itself is based on the valuation of FTX. The circularity here is dangerous.

The crypto industry is now at a crossroads. This counter-culture that puts it at odds with centralized regulation will only lead to more scandals, turmoil and loss of confidence.




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