Virtual Assets, Real Fraud: Scams and Other Cryptocurrency Crimes | Megaphone

With the bankruptcy of some giants in the world of virtual assets (Silvergate Bank, FTX, Terra/Luna, etc.) deja vu of a film that has become all too familiar. Now, in a world that is too cool to fail, comes to an end the perhaps innocent conception that investment in virtual assets tended towards self-organization without the need for regulatory intervention. And the crimes are there, masked in promises of easy investment, making pernicious use of investors’ lack of literacy and preparation.

In Portugal, the use of virtual assets has registered a boom in recent years, driven by (misleading) advertising that we are a “tax haven” for cryptocurrency investors, the increase in savings and free time in the pandemic, the growth of e-commerce, the interest of investors in diversifying their portfolios and disbelief in the banking and financial market.

This one boom has posed several challenges, including the need for stricter regulation to ensure the security of transactions and protect investors, coupled with a lack of understanding and trust on the part of the general public. Which is worrying when national and European statistics place Portugal as the country with the least financial knowledge. Are we really a paradise?

Financial and technological illiteracy, lack of regulation and a donut of supervision are the perfect ingredients for the criminal recipe. After all, we have a “new” method of transacting funds that does not use a central institution, nor does it depend on supervision, and which is based on the privacy and anonymity of its users. These characteristics facilitate transactions without adequate control measures and, consequently, allow the use of virtual assets as an auxiliary instrument in the practice of criminal offenses.

After all, we are always a paradise: a paradise for criminal activity. And the creativity of criminals is not small: promises of enrichment (at a distance from webinars online free or from a Whatsapp, Signal and Telegram group), fraud (scams ponzi or pyramid, job offers with payment in cryptocurrencies), technological scams (phishing, pharming, spyware), money laundering (computer fraud, use of figureheads, smurfing, commingling), cyber attacks on exchanges of cryptocurrencies (as in the theft of private keys), “dummy” purchases and sales (in which buyer and seller are the same person – wash trading of NFTs).

The problem is that this diversity of situations collides with a penal provision that invariably leads to the crime of computer fraud — which is not flexible enough to accommodate all these realities — and, in an ancillary way, to the crime of money laundering. Added to this obstacle is an enormous difficulty in the investigation that leads to the discovery of the identity and subsequent accountability of the criminal agents. And, of course, in a clear limitation of supervision (for now) to the scope of preventing and combating money laundering and terrorist financing, which can limit an integrated and broad fight against the phenomenon.

How to avoid these pitfalls?

Firstly, you should inform yourself and understand technological and financial concepts, which are essential for weighing the risks of investments and assets. So be wary of get-rich-quick schemes, free transfers, cryptocurrency giveaways and emails suspicious (threats that you are at risk of losing your money, blocking or suspending your account). Check the authenticity of the information, websites, apps, emails and addresses before making any transactions. Use reliable platforms and services. Check that the sender of the emails uses the brand as the domain and if the wallet you transfer funds to is a “watch wallet“. Finally, do not share your private keys and seed phrases and closely monitor transactions and operations in your wallet to timely detect suspicious activity and fraud.

A paradigm shift is needed, demystifying this type of investment as a synonym of an easy way to get rich quickly and with high rates of return, but rather as a sustainable and diversification alternative. Understanding their characteristics and risks, understanding the concepts and rules in and of the game, accepting the uncertainty and risk characteristic of virtual assets.

It is essential to focus on building a culture of investment in virtual assets through the sedimentation of digital and financial literacy of investors, promoting training actions and alerts to the safe and responsible use of virtual asset platforms, as well as investing in the regulation of these matters and in the supervision of the entities involved. Also promoting the maturation of the sector that can benefit all stakeholders.

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