Investors are urged to be on the lookout for cryptocurrency scams this year as a recent report suggests this threat poses a significant risk of loss.
This advisory is issued by the North American Securities Administrators Association (NASAA). According to the agency, cryptocurrency fraud is the biggest threat to investors "by far". NASAA says it is imperative that by 2022, investors understand what they are investing in and with whom they are investing in terms of cryptocurrencies.
"The 'crypto millionaire' story attracted several investors to try investing in cryptocurrencies or crypto-related investments this year, and with them, many stories that started to emerge those who bet big and lost big started to emerge, and these stories will continue to emerge in 2022 ," said the Enforcement Section Committee Co-Chair Joseph P. Borg.
Joseph Borg adds "unlisted private offerings are generally high-risk investments and do not have the same investor protection requirements as those sold through public markets."
NASAA identified the most common cryptocurrency fraud schemes as fake digital wallets and multi-level marketing platforms. Another standard scheme is "pump-and-dump," or when a group of people coordinate the promotion of a cryptocurrency to raise the price of a cryptocurrency and suddenly sell it so many investors are stuck there. The increase in fraud in cryptocurrencies goes hand in hand with the increase in the use of crypto assets and their value in the market. According to CoinMarketCap, the global cryptocurrency market cap currently stands at $2 trillion, with Bitcoin leading the industry, followed by Ethereum, and Tether. However, there are currently more than 8,000 cryptocurrencies, which opens the door to many scams.
The global cryptocurrency market is expected to grow exponentially over the next few years, and experts predict that 90% of the global population will adopt cryptocurrency within the next decade. The cryptocurrency market has grown rapidly from $1.44 billion in 2020 to $1.63 billion in 2021. NASAA Enforcement Committee Deputy Chair Joseph Rotunda added that investors should exercise caution when navigating the “crypto frenzy.”
"Investments in cryptocurrencies, interest in crypto mining pools, crypto storage accounts and securitized tokens should be seen for what they are: very risky speculation with high risk of loss," he said.
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