In recent months, cryptocurrencies like Bitcoin and Ethereum have begun to develop a bad name. The fact that ransomware typically demands payment in Bitcoin has helped to create negative associations for the brand.
Then there are the rapidly fluctuating exchange rates that look like deliberate attempts to manipulate the market. “Pump and dump” is a known tactic used by unscrupulous investors to temporarily increase the value of their holdings before selling them off for maximum value.
And the reality is that scammers and hackers are working the system to perpetuate fraud.
The headlines are only part of the story
Much of the problem with cryptocurrencies is that regulation still lags behind traditional currencies. National banks, like the Federal Reserve or the European Central Bank, have not yet decided how best to deal with cryptocurrency – or how to protect people using them.
This lack of consistency, and the perceived privacy offered by cryptocurrencies is the reason that criminals are so attracted to the system. So much so that cryptocurrency scams are now the second most common investment scam in Australia for instance.
Crime sells newspapers, so it is little surprise that the media is quick to publicise instances of fraud. But in the same way that most online transactions made using traditional currencies are perfectly legitimate, so too are cryptocurrency transactions. Fraud remains a small part of the bigger cryptocurrency picture, even if the media headlines suggest otherwise.
Digging into the statistics proves this to be the case. Take the Australian example. In 2017, there was a total of 200,000 scam reports submitted to the Australian Competition and Consumer Commission – the government body that enforces consumer protection law. The accumulated losses from these scams was AUD $340 million – a fairly large number for a country of 25 million people.
But when you drill down into those figures, just AUD $2.1 million of those losses were attributed to cryptocurrency fraud. Less than 1% of all reported fraud in Australia was cryptocurrency related.
On a worldwide scale however, Bitcoin estimate that $3.25 billion will be lost to fraud.
A serious problem for the unprepared
Like any other currency, cryptocurrencies can be risky for the unprepared. Before jumping on the Bitcoin bandwagon, you must understand what it is for, how it is used, and the common scams you need to avoid.
At the front end, always be suspicious of “get rich quick” schemes. These systems can be very profitable – for the scammer running them. You should always check anything that sounds too good to be true. Similarly, check that websites maintain the same level of security as any other online store before making a cryptocurrency payment.
One other thing to bear in mind – virtual wallets. Virtual wallets are used to securely store your cryptocurrency on your computer. If the wallet is compromised or stolen, your cryptocurrency goes with it.
Hackers will try and steal digital wallets, so it is vital that your computer is properly secured. You must install robust anti-malware, like Panda Dome, on your computer to identify and block unauthorised attempts to access your wallet and its contents.
“Bitcoin is one of the biggest scams in centuries, like the one the world has never seen and we are only at the beginning of this history. Bitcoin scams have been famously criminal and public in nature. The bottom line is scammers also want to profit somehow from Bitcoin, but through nefarious means. This typically involves targeting unprepared victims, who end up losing their Bitcoin as a result, we need to know and make sure we don’t become the next victim“, explains Herve Lambert, Global Consumer Operations Manager at Panda Security.
For most people, cryptocurrency is not yet an issue. But when you do decide to start using one, make sure that you are properly protected and you can avoid becoming one of the minority of people who become victims of scams.