Interest in cryptocurrency has boomed over the past two years and with more people investing than ever before, crypto scammers are constantly finding new and sophisticated ways to defraud well-meaning investors. Crypto crime had a record-breaking year in 2021, with scammers making off with an estimated $14 billion of investor’s funds.
With this rapid increase in cryptocurrency cons, governments around the world are scrambling to put laws in place to protect investors. But which countries have the most regulations?
We’ve looked into factors including the legality of owning cryptocurrency, whether cryptocurrency businesses need a licence to operate and whether currency revenues are taxed to find out the countries with the most protections for investors.
We’ve also taken a look at some of the biggest crypto cons over the last two years and provided some helpful tips on protecting yourself against potential scams.
1. Australia, South Korea, United Kingdom, United States, Denmark, Japan, Norway
Crypto regulation Score: 5/5
Seven OECD countries achieved a perfect score for the categories we looked at, with all of them legalising the ownership of crypto, requiring a licence for crypto business, taxing crypto as an asset, and being widely used to purchase goods. Their central banks are also developing their own digital currencies too, protecting investors by offering less volatile alternatives to traditional cryptocurrencies.
2. Chile, Sweden, Turkey, Mexico, Austria, Canada, Colombia, France, Germany, Greece, Israel, Netherlands, Spain, Belgium, Czech Republic, Estonia, Finland, Ireland, Italy, Lithuania, New Zealand, Poland
Crypto regulation Score: 4/5
21 OECD countries share a score of four out of five for their cryptocurrency regulations, with the majority losing out on the top spot thanks to their central banks not developing their own digital currencies.
Turkey’s attitude to cryptocurrencies is the most mixed in this list, whilst ownership is not illegal, there is no supervisory or regulatory authority dealing with cryptocurrencies. To combat this, the government has demanded the details of trading platform users to protect them from being defrauded.
3. Mexico, Latvia, Portugal, Hungary, Switzerland
Crypto regulation Score: 3/5
Four countries share third place, all scoring three out of five for their crypto regulations. The majority of these nations don’t require crypto businesses to register with the government or qualify for a licence, and this lack of governmental oversight could harm potential investors.
Now that we’ve looked at how governments are protecting crypto holders with regulations, we can delve into exactly how financially damaging these scams can be. From rug-pulls to exit scams and Ponzi schemes, here are the biggest crypto scams of the last two years.
1. Africrypt – $3.6 billion stolen
Taking the top spot as the biggest crypto scam from the last two years is Africrypt. The founders of the South African cryptocurrency platform lured wealthy investors with promises of 10% daily returns before claiming they had been hacked and funnelling an estimated $3.6 billion in Bitcoin into their own wallets.
2. Bitconnect – $2.4 billion stolen
Bitconnect was suspected of being a Ponzi scheme as far back as 2018 thanks to its multi-level marketing structure and promises of 1% daily compound interest, an impossibly high return. It took until 2022 for the US Department of Justice to charge its founder with fraud and money laundering, after its value collapsed in 2019.
3. Thodex – $2 billion stolen
This exit scam defrauded its investors of an estimated $2 billion. The founder of this Turkish cryptocurrency exchange announced the site would be temporarily closed before shutting down the site entirely and fleeing with the funds of its 400,000 users. Recently arrested in Albania, he faces extradition back to Turkey on charges of aggravated fraud and forming a criminal organisation.
From cryptocurrency ads to bitcoin ATMs, cryptocurrency has skyrocketed in popularity since 2021. With no banks to warn against suspicious transactions and potentially block fraudsters from stealing your assets, it’s an alarmingly common way for scammers to get their hands on your cash and disappear without a trace. With this in mind, here are some tips to help you protect your crypto investments.
Keep in mind the old adage that if something seems too good to be true, it probably is. As well as being good advice for investing in general, it also applies to crypto investment and business opportunities. Crypto scammers often try to lure you in with promises of unrealistically high guaranteed returns, which leads to financial disaster when you find you can’t get your money back.
Reading the whitepaper of any potential investment is a surefire way of spotting a potential scam. This document will explain how the network will function, and its protocols and blockchain too. Make sure you take the time to research a potential project as scammers often create poorly written whitepapers, have figures that don’t add up and don’t tell you exactly how your money will be used.
Identifying the team members behind a cryptocurrency project can also help you recognise a potential scam. Whitepapers from legitimate projects always identify the team behind them. If the project is open source it might not list the developers, so you should search for coding comments and discussions around the web. Some projects may use apps for discussions. If you can’t find any traces of the project there, it’s probably a scam.
As legitimate cryptocurrency projects are more concerned with the goals they have outlined rather than raising cash, you should be wary of how they market themselves on social media. You won’t find legitimate developers hyping themselves up on social media and creating buzz to inflate the value of their crypto, which could be a pump-and-dump scheme. Legitimate crypto projects will focus instead on their blockchain-based services, not the value of their coins or tokens.
Data for the biggest crypto scams of 2021 and 2022 was taken from Comparitech.