Crypto crime has been on the rise especially since the pandemic began.
How are these crimes committed?
And what can you do to stay ahead of scammers?
Thats afivefold increasefrom 2020.
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Crypto crime is a fast-growing enterprise.
Australian data confirm the global trends.
In December, federal policetold the ABCcrypto scam losses for 2021 exceeded A$100 million.
Thats despite many incidents likely left unreported, often due to embarrassment by victims.
Theft from exchanges
Most consumers obtaincryptocurrencyfrom anexchange.
Typically the cryptocurrency is held in a custodial wallet.
In other words, the exchange stores the cryptocurrency on the consumers behalf.
For security, the remainder is held in cold wallets (not connected to the internet).
The recent BitMart hack is a cautionary tale.
Its unclear when this will happen, withCNBC reporting in Januarythat customers were still unable to access their cryptocurrency.
BitMart wasnt the first exchange to be hacked, and it wont be the last.
Similarly, consumers may be left with losses if an exchange fails for commercial reasons, rather than theft.
Australians were left stranded in December when liquidators wereappointed over Melbourne-based exchange myCryptoWallet.
The cryptocurrency will then be under your direct control.
But be warned, if you lose your private keys,you lose your cryptocurrency.
Practical challenges
There are practical legal challenges in the crypto crime environment.
Taking civil legal action may be possible, too, but identifying perpetrators is difficult.
So prevention is easier than a cure.
If an offer sounds too good to be true, it almost certainly is.
But there are currently no other licensing requirements (such as capital requirements or cybersecurity, for example).
Last year, the Senate Select Committee into Australia as a Technology and Financial Centrerecommendeda more comprehensive licensing framework.
Mandatory measures to curb cryptocurrency crime at the exchange level will likely be high on the agenda.
