From trading at less than a dollar in its first few years of existence to over $60,000 in late 2021, the story of bitcoin’s meteoric rise has often been used by scam artists as bait for inexperienced investors looking to make huge gains in the crypto space.
The promise of “the next big thing in crypto” has been used to peddle bogus coins, make false claims, and swindle people out of their money. Not to mention exchanges and Initial Coin Offerings (ICOs), phishing attacks and other cyber hacks used to steal people’s crypto assets.
At the more sophisticated end of the spectrum, even some of the world’s largest crypto firms have been subject to high-profile hacks, with the likes of Coinbase and Binance losing hundreds of millions of dollars worth of crypto assets to cyber-attacks this year.
Related: Report: Binance Nears Identification of Those Behind Oct. 6 Hack
In the U.K., the Financial Conduct Authority (FCA) has also observed a jump in the number of reported crypto asset scams across the country.
A Freedom of Information (FOI) request made by Capital Block reveals that between July 2021 to June 2022, the FCA received a total of 7,287 reports of crypto asset scams, 45% more than during the previous year.
The rise in investment scams and cyber breaches in the past year-and-a-half suggests that from retail investors to institutional players, the crypto sector suffers from a lack of security and awareness.
In a press release commenting on its findings, Capital Block’s CEO, Tim Mangnall, pointed to the dearth of effective regulation as a major part of the problem.
“That the world’s financial centers do not yet have effective crypto regulation is quite shocking. Crypto is here to stay and it must be regulated consistently internationally and treated like any other financial investment, such as stocks and shares,” he said.
But while Mangnall may lament the lack of effective regulation, lawmakers have been working to improve the situation. In fact, 2022 may well be remembered as a turning point in efforts to regulate the global crypto sector.
Legislative moves like the E.U.’s Markets in Crypto Assets (MiCA) regulation, for example, devote significant attention to protecting consumers as part of the E.U.’s efforts to create an inhospitable environment for unregulated offshore crypto firms.
Besides making it harder for unscrupulous actors to access retail investors in the first place, the regulation also clarifies what is and isn’t criminal behavior.
An explicit rulebook will also be populated with warnings, double and triple checks intended to prevent those who aren’t well-informed from making risky investments. And while responsible platforms in the crypto space put the same checks in place, the practice is not universally observed.
Finally, there are strict rules on advertising investments that haven’t always been applied to crypto assets which means that moves to protect consumers from misleading advertisements and ensuring that only approved companies are allowed to advertise would have to be prioritized.
The U.K. has gotten a head start with its proposed Financial Services and Markets Bill, which will require crypto asset service providers to get permission from the FCA before they can legally advertise.
Read more: U.K. Crypto Firms Will Need FCA Approval to Advertise
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