top of page
  • B Vrettos and M Bacina

Regulators rattled about surge in scams

Updated: May 3

The past week has seen both UK and New Zealand regulators issue statements warning about the risks of scams in digital currencies (and taking a shot at volatility of those assets). Both statements emphasise consumer protection, warn against unsolicited offers of investments in digital assets, and encourage consumers to get a better understanding of the nature of digital assets.

When any market booms, scammers are drawn to try and take advantage of the excitement and to prey on those who are vulnerable or don't pay enough attention to what they are doing.

The Financial Conduct Authority (FCA), the UK conduct regulator for financial firms and financial markets, issued a statement reminding consumers that :

[investors] in these types of products ... should be prepared to lose all their money.

This is a fairly strong version of "don't invest what you can't afford to lose" but remains sound advice, digital assets remain experimental and have very volatile pricing.

The FCA has an additional protection from scam companies, with a register for digital asset firms in the UK, so consumers can check if a business they are dealing with is at least registered with the FCA. As of today there's a short permanent list and a very long temporary list.

The Financial Markets Authority (FMA), New Zealand's government agency responsible for regulation of financial markets, told the NZ Herald that

New Zealanders considering purchasing cryptocurrencies, such as Bitcoin, should be aware that these are high risk and highly volatile assets

And warned of scams:

Cryptocurrencies are not regulated in New Zealand and are often exploited by scammers and hackers.

Like the UK, NZ has a Financial Service Providers Register which provides access to a dispute resolution scheme, but many digital asset providers are not Financial Service Providers so won't appear on that register.

Cryptopia was a NZ cryptocurrency exchange based in Christchurch and, when it entered liquidation, it had over 2.2 million registered users worldwide. A hack in 2019 resulted in significant amounts of assets being taken and the company was unable to continue trading and entered liquidation.

Regulators are continuing to develop jurisdictional registers for providers of digital assets in the bid to help protect consumers. However, the borderless nature of many digital currency exchanges that operate solely online continue to make it difficult for regulators to track the operators.

There is no equivalent to the FCA's register in Australia but since digital currency exchanges registered with AUSTRAC can provide a registration number which can be confirmed with AUSTRAC. Scams proliferate in all industries and sectors, not just digital currency and ultimately the best person to defeat a scammer is the end user, by taking proper care, research and attention to any purchasing or involvement in digital assets.


bottom of page