The financial watchdog in the crypto-friendly country of Malta has issued a guidance note to the public regarding cryptocurrency scams.
As adoption and the popularity of digital currencies continues to rise, so to do the number of scams and fraudulent activities related to the industry. Whilst in Malta and other jurisdictions such as France, USA, Switzerland and Singapore, crypto activity is regulated by the government, there are still a few bad actors that slip through the net.
The note is intended to provide consumers with guidance on what to look out for when investing in the sector and it includes sections on how scams start, how to identify scams, staying safe whilst investing, and what to do if you get scammed.
“The MFSA has published a number of warnings regarding entities or websites which are of a dubious nature and which should therefore be avoided by consumers. The MFSA wishes to further educate the public on how to identify and avoid the actions recommended, in the event that one encounters a scheme of a dubious nature in the crypto-asset sector.”
In addition to this, it identifies 11 “red flags” to look out for that include claims of an unrealistic rate of return, lack of regulation, aggressive selling techniques, the use of buzz words such as “no risks”, “gains guaranteed”, and “become a billionaire”, and the absence of physical local offices.
Types of scams mentioned include fake exchange platforms, fake e-wallet apps, and fake Initial Coin Offerings (ICOs). The report states that “persons conducting scams may issue ICOs with no underlying value” before disappearing along with the investors money.
The Malta Financial Services Authority (MFSA) is the single regulator for financial services in the country and it regulates banking, securities markets, investment exchanges, and as of 2018 the crypto-asset sphere as well.
Last year, Malta became one of the first jurisdictions in the world to regulate in favour of cryptocurrency, blockchain, and related service providers. Through the implementation of three Acts, they provided much needed regulatory certainty in the industry and their laws have influenced subsequent developments in a number of other jurisdictions.
This led to the relocation of the world’s biggest cryptocurrency exchange, Binance, to their shores, closely followed by a number of other big names.
As a result, Malta-based and regulated exchanges now account for the majority of the world’s cryptocurrency trading volume according to the March Exchange Review, published by CryptoCompare.
The note closes with the wise advice; “always remember- if it seems too good to be true, it probably is!”