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5 Vulnerabilities of the Cryptocurrency Market Used by Scammers to Trick People

Just like any other businesses have risks, the cryptocurrency investment is not an exception. There is a big number of fraudulent projects that take advantage of the cons of the cryptocurrency industry. These vulnerabilities make it easier to attract people, and then leave them without their funds.

Republished by Plato



Jan 14, 2021 at 15:28 // News

Cryptocurrency industry is attractive for scammers

Just like any other businesses have risks, the cryptocurrency investment is not an exception. There is a big number of fraudulent projects that take advantage of the cons of the cryptocurrency industry. These vulnerabilities make it easier to attract people, and then leave them without their funds.

Due to the increased losses consumers have made, any regulator or government must protect its people. Since these products are still new in the market, some countries have taken serious measures to safeguard users of these digital commodities.

Some cryptocurrency companies offer investments in digital currencies or even lending or schemes associated with coins which promise to give abnormal or high profits in return. Companies that make such ventures involve taking high risks with user’s funds. Users should first understand properly before participating in such high-risk and speculative investment activities.

The United Kingdom’s Financial Conduct Authority ( FCA) came out to warn venture capitalists that they should be ready to make heavy losses if they wish to invest in digital currency products promising abnormal returns. Despite the report concerns general risks that are faced by investors when dealing with digital assets, some of them are actual vulnerabilities that make the industry attractive for scammers.

Product complexity

Some of the products and services offered by a certain coin are very complex to understand. This makes it harder for users to discover the risks that come with using such coins. Besides, the complexity of the technology and lack of awareness about it results in the lack of trust, which stalls its adoption. Let alone the fact that there is indeed a large number of scams. 

As CoinIdol, a world blockchain news outlet, reported, the number of cryptocurrency frauds surged in 2020. This only adds to the confusion, making the beginner investors easy victims for scammers.


Marketing materials

In the process of attracting more customers to invest in their products, companies tend to make a fuss about the returns of their goods and services and also understate the associated risks. They lie to clients. Once customers make investments, then they are given fewer returns than agreed hence making losses.

Cryptocurrency investments can indeed bring high returns due to the ability of coins to gain value in a matter of hours. However, it might very well lose a great deal of it in the same way. For this reason, it is very difficult to set any exact return rate. If a company promises high and stable returns for cryptocurrency investments, it is most likely a scam project.

Lack of regulations

Cryptocurrency guidelines are still disorganized, random and complex to understand especially when it comes to tax treatment. The lack of a proper regulatory framework leaves venture capitalists scared to invest. No serious investor will make big investments if one doesn’t understand the benefits of a product he is to invest in. Financial regulators globally are trying to draft regulations that will properly govern the cryptocurrency industry.

On the other hand, the lack of a regulatory framework sometimes makes it easier for fraudsters to get into the industry. Despite most regulators require startups to comply with the KYC and AML requirements, the lack of framework makes it possible to skip them, or the provided data is not checked thoroughly.

Consumer protection

The regulators and law enforcers do their best to protect consumer rights. However, it might be difficult, considering the online nature of such companies. Legitimate companies usually disclose all information about themselves, including the names of the management and the registration data. Some scammers also try to look as unclosed as possible.

However, in case they vanish with the investors’ money, it might be difficult to track and hunt down people behind the scheme. For this reason, the cryptocurrency industry is attractive for illegal players.


It is a very risky business to store cryptocurrencies. Numerous exchanges and wallets were hacked and coins stolen by thieves. This has remained a serious threat to the community. It is still very hard to trace or reverse the stolen coins.

The industry has seen a great number of hacks that affected millions of people. One of the most famous hacks in the history of the industry is the hack of Mt.Gox exchange. Among other big hacks is the hack of Cryptopia, a New Zealand cryptocurrency exchange, which took place in 2019. 

On the other hand, scammers also take advantage of the existing security issues. First, they pose as reputable exchanges and then act as if they were hacked to get away with the customers’ funds. 

Cryptocurrency market offers a great number of both legitimate and fraudulent companies, and sometimes it is indeed difficult to tell who is who. However, a great deal of research will help to tell a company that is worth dealing with.



XRP Lawsuit: On Ex-SEC Chair Jay Clayton’s Sudden U-Turn After Suing Ripple

Republished by Plato



Ex-SEC Chairman Jay Clayton Says Bitcoin's Non-Security Status Still Awaits Regulation

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Ripple’s Boss, Brad Garlinghouse, on Monday, left a few remarks via his Twitter handle on a Wall Street Journal’s post co-written by former US-SEC, chairperson, Jay Clayton.

The post which was co-written by Brent MacIntosh, the former Undersecretary of the US Treasuries for International Affairs, sought to preach the all-to-familiar stance of most crypto companies: ‘Crypto needs regulation, but it doesn’t need new rules.’

Garlinghouse spelled out surprise over Clayton’s turncoat comments that the US government has no concrete and adequate regulatory framework for the crypto industry. He further added:

Cryptos, like nearly any new innovative technology, can be used for good or bad purposes. The problem is that US companies seeking to be compliant and use this tech for good are left in limbo (or for Ripple, worse!) because of a lack of a clear, predictable framework.”

Jay Clayton, in his last days at the SEC, pulled a shocking stunt on the crypto community, suing Ripple for what it believes is the undocumented sales of large-scale XRP digital assets to unidentified customers.

The bane of the case which was first announced in December last year is in determining if XRP – the digital currency of Ripple – is an investment contract or just another type of asset existing in digital forms. Assets bought and sold do not lie under the jurisdiction of the SEC, but investment contracts (also known as securities) are well within their powers to investigate, using the Howley test as a yardstick.

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When compared to Bitcoin and ETH…

ripple xrp premined
Via CoinMarketCap/XRP

XRP, unlike fully decentralized Bitcoin, takes the shape of a centralized digital currency. This is because Bitcoin is still being mined by different people across the world, but Ripple pre-mined billions of XRP coins.

How The Case is turning out

The latest in the seven-month-old lawsuit is a winning streak for Ripple. Judge Sarah Netburn denied the SEC’s plea to examine all records of Ripple’s conversation with lawyers and expert advisers to determine if it knew what class of asset XRP is, and what violations of the SEC’s laws it may have knowingly violated. This signified a sigh of relief for the company which has called the lawsuit a hindrance to its growth and plans to go public.

Clayton further expressed that the foundational frameworks of the US laws suffice to build upon for crypto regulations, but the government has to be careful not to commit under-regulation or over-regulation.

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Ethereum Co-Founder Anthony Di Iorio Bets Big on the Future of Cardano and Polkadot

Republished by Plato



Anthony Di Iorio, a Canadian entrepreneur and the co-founder of leading smart contract platform Ethereum, said that he believes in the potential of Cardano (ADA) and Polkadot (DOT).

In an interview with crypto proponent Anthony Pompliano, Di Iorio, who is also the CEO and founder of Canadian blockchain startup Decentral and crypto wallet Jaxx, revealed that he has a diversified investment portfolio featuring several top projects, including Cardano and Polkadot.

A Big Fan of Cardano and Polkadot

He said:

“Now I’ve kind of fallen back to just simplicity. I’m in a number of different projects, but the majority of my stuff is in the top projects. I’m a big fan of Polkadot, I’m a big fan of Cardano.”

Di Iorio went on to narrate why he was so sure of the future of these two projects. He had joined the Ethereum development team earlier in 2012 when he met Vitalik Buterin at a Bitcoin conference.

He has formed strong relationships with other co-founders of Ethereum, including Vitalik Buterin, Cardano’s founder Charles Hoskinson, and Polkadot’s current CEO Gavin Wood.


Di Iorio admitted that while he worked with these men, he knew that they were goal-oriented and would help push these projects further.

He continued:

“Big fan of Charles, let’s say that. You know, taking some different approaches in the way that they’re doing things, much more on the academic side of what he’s done and bringing stuff forward. Real big fan of Gavin Wood… Knowing those guys from the days back at Ethereum – and knowing their drive and knowing their competitiveness and their smarts – I was able to see those projects for the last few years and know that they were gonna get to where they’ve gotten up to.”

Not Getting Lost in DeFi

Despite all the recent hype about DeFi, Di lorio pointed out that he is keeping his investments simple and investing in larger projects.

“Most of my stuff is in the top few things, Ether, Bitcoin, Cardano, Polkadot. I like Cosmos as well. And there’s a few others, but I’m not getting lost in all the DeFi stuff. I just think there’s not enough time, not enough energy. It’s a full-time gig to be running a lot of that stuff and keeping on top of stuff, so I’ve simplified my life quite a bit over the past few years.”

Featured image courtesy of Business Insider


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What you should know if your bank is exposed to Bitcoin





On one hand, El Salvador recently became the first nation to officially declare Bitcoin as its legal tender, and on the other, several nations have recently opined that their indigenous banks face a ‘threat’ from the world’s largest crypto-asset. Nevertheless, the rise in the adoption of cryptocurrencies has been accompanied by regulators taking the fast-growing market seriously. 

Banks will now face “the toughest” capital requirements for their holdings in Bitcoin and other crypto-assets under global regulators’ plans to brush off the insecurity offered by the “volatile” crypto-market. 

Using money laundering, reputational challenges, and massive price swings as the base of their proposal, the Basel Committee on Banking and Supervision is in the news after it explicitly stated that the banking industry faced “increased risks” and “financial stability concerns” from crypto-assets.

Accordingly, they have now placed Bitcoin in the “highest risk” category. The aforementioned committee comprises a host of nations and global institutions as its members.

The Basel Committee isn’t alone, however, with a Bank of International Settlements exec recently commenting that El Salvador’s Bitcoin policy is an “interesting experiment.”

What’s more, the panel proposed a 1250% risk weight be applied to a bank’s exposure to Bitcoin and certain other cryptocurrencies. Bloomberg’s estimates highlighted, 

“In practice that means a bank may need to hold a dollar in capital for each dollar worth of Bitcoin, based on an 8% minimum capital requirement.”

However, stablecoins and other tokens tied to real-world assets are set for lower capital requirements. The report further highlighted, 

“The capital will be sufficient to absorb a full write-off of the crypto asset exposures without exposing depositors and other senior creditors of the banks to a loss.”

The proposal did not specify any specific timeline, and hence, the implementation of these rules can take a couple of years. The proposal is, however, open to public comment before it comes into effect. It should also be noted that the committee said that the initial policies were “likely to change” several times as the market “evolves.”

Even though banks like HSBC have been cautious about stepping into crypto-trading, a few big names, like Standard Chartered Plc have announced their entry into the space.

As for Bitcoin, it fell by over 3.7% in the last 24 hours to trade at $35,418 at press time.

Source: Coinstats

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