Crypto scams take place all over the world — but Russians are being cheated out of their crypto more and more each year.
Investors reportedly lost a whopping $1.5 billion to cryptocurrency scams in the first half of 2021. According to Alexey Raevsky, the CEO of data loss prevention firm Zecurion, the current figure is two to three times more than it was in 2020.
Russia accounts for about 2% (equivalent to $30 million or 2.2 billion rubles) of the said volume of crypto scams.
One of the reasons for the proliferation of cryptocurrency fraud is the increase in the popularity of digital assets. Over the past year, global crypto adoption increased by over 880%. Particularly, the rising desire to jump on the crypto train at a time when interest rates are low and the volatility of traditional financial markets is high fuelled the latest crypto rally.
Speaking to Russian news media, Raevsky pointed out the current regulatory gap between traditional markets and the seemingly loosely regulated crypto space. He opined that cybercriminals still depend on the lack of mandatory user verification to conduct illegal operations and stay anonymous. Meanwhile, in traditional settings, no transaction can be performed without identification. The CEO is confident that introducing such checks to the cryptocurrency market could help sanitize the space.
Speaking of regulation, several countries have rolled out policies to require crypto exchanges and other related businesses to comply with anti-money laundering laws. For instance, leading crypto exchange Binance recently introduced mandatory user identification under its “Know Your Customer” program on Aug. 20. The move came after months of discourse with regulators across the globe.
Despite the supposed benefits of mandatory KYC, Ekaterina Tarasova, co-founder of IdolMe Agency, does not entirely agree that enforcing strict verification requirements will be beneficial to crypto exchanges. She argues that it could lead to a decline in the inflow of new customers. Similarly, Dmitry Volkov, CTO of the international crypto exchange CEX.IO, noted that malicious actors will be able to turn to other services that do not enforce strict KYC requirements, such as unregulated and decentralized exchanges.
According to Jānis Kivkulis, leading strategist at investment company Exante, one of the downsides of compulsory user identification is counterfeiting. Malicious actors can always falsify their documents. Moreover, a lack of solid security infrastructure could see personal user information fall into the hands of hackers.
Overall, stringent verification requirements could significantly lower criminal activity, help the government with tax reporting, and facilitate the tracking of illegal transactions.
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