HOW TO BEWARE OF SCAMS
by Contributor
(Feb. 12, 2019) — The earliest records of human societies have shown some kinds of rules and regulations. In history, they have provided certain guidelines that people need to uphold. The result has always been a society free of anarchy.
In recent years, with the introduction of the cryptocurrencies to our society, certain problems started to arise. The technology behind them makes the transactions slightly harder to track opening the doors for a load of illicit activities all over the world.
In short, all this altcoins buzz requires certain regulations to keep things in order. But what regulations are required?
Transactions
As we already mentioned, cryptocurrencies have been witnessed in numerous illegal activities. It all started with the first reports of bitcoin being used as a payment service on the darknet. As new currencies started to appear on the market, so did the buzz for using them. That means that at this point all the altcoin buzz is responsible for using altcoins as a payment method for anything that isn’t legal.
The technology behind the cryptocurrencies provides certain anonymity for the sender and receiver of the funds. All of this might all come to an end. Applying a regulation to track the transaction would definitely cut down on the ill-founded activities all over the world. Russian Watchdog has already started working on ways to track the transactions. The success of a process that can track the transactions will definitely be a good first step to this regulation.
Initial Coin Offerings
Initial coin offerings, or ICOs for short, is another aspect of the altcoins that requires regulation. The altcoin buzz, mostly from the investor’s point of view, provided scammers to offer altcoins to them. Scammer basically provides a real-life cryptocurrency system application to investors what will result in a new altcoin. Investors invest money in that altcoin and in return they are paid in the same altcoin. The scam works in two different ways: the investors either don’t get the altcoins or, in more elaborate scams, will get altcoins that are practically worthless.
To put this in perspective, in 2017 80% of all ICOs were a scam. It is true that two years ago, a regulation was nowhere in sight, but now we might be on the verge of looking at one.
Products
The growth of the altcoin buzz increased the investor’s interest in getting in the game. The reason why they are still skeptical in regards to it is the fact that even though they rely on a decentralized network, there are certain security risks involved. Since the beginning of the altcoins, there have been all kinds of hacks where the investors or customer were the victims. Some had a happy ending, like the Coincheck hack from 2018, but most of them don’t. That means that people lose money due to the lack of security and regulations.
A good example of a financial product is a bitcoin future contract. Launched by CME and CBOE in the US, it is one of the rare examples of a financial product based on a cryptocurrency. On the other hand, the US has been trying to launch ETF or exchange-traded fund for years and failed.
In the case of the financial products backed from cryptocurrencies, applying regulations is slightly more complicated. That is due to the nature of the products itself, which is why it might be a while before we start to see regulations applied to them.
Conclusion
As we said, regulations help keep thing tight and neat. Cryptocurrencies are a segment where regulations are desperately needed. With the help of those regulations, we would start to see the cryptocurrencies in a lot more aspects of our daily lives.