Investors should look out for cryptocurrency scams this year, as a new report says they pose a major financial threat.
According to a new report from the North American Securities Administrators Association (NASA), cryptocurrency scams are “by far the number one threat to investors.” NASA said that it is critical that investors in 2022 understand what they are investing in and with whom they are investing when it comes to cryptocurrencies.
The stories of “crypto millionaires” have attracted some investors to try their hand at investing in cryptocurrency or cryptocurrency-related investments this year, and with them, many stories of those who bet a lot and lose a lot, and will continue to emerge in 2022, said the co-chair of the enforcement division committee. Joseph b. Borg, director of the Alabama Securities Commission, in a statement.
“Unregistered private offerings are generally considered high-risk investments and do not have the same investor protection requirements as those sold through public markets,” Borg added.
NASA has identified the most popular cryptocurrency schemes as fake digital wallets and multi-level marketing platforms. Another standard scheme is “pumping and dumping,” or when groups coordinate an effort to promote a cryptocurrency to drive up the price and then coordinate a sale to lower the value of the cryptocurrency for everyone else.
The rise in cryptocurrency scams goes hand in hand with the increased use and value of crypto 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 8000 cryptocurrencies, which opens the door to many scams.
The global cryptocurrency market is expected to grow exponentially over the coming years, and experts predict that 90% of the world’s population will adopt cryptocurrencies in the next decade. In just the past few years, the cryptocurrency market has grown from $1.44 billion in 2020 to $1.63 billion in 2021.
NASA Enforcement Division Vice Chair Joseph Rotunda added that investors should exercise caution when navigating the “crypto frenzy.”
“Investments in cryptocurrency trading platforms, interests in crypto-mining pools, crypto deposit accounts, and securitized tokens should be viewed for what they are: extremely risky speculation with a high risk of loss,” he said in a statement.
Aside from investments related to cryptocurrency and digital assets, other major threats pointed out by NASA include promissory notes fraud offerings, financial scams found on social media, and financial schemes related to self-directed individual retirement accounts.
NASA has offered some expert advice in dealing with these threats, including paying close attention to domain names, being aware of fake customer reviews, and if something sounds too good to be true, it likely is.