Crypto Scams: What the industry is doing to educate users, prevent fraud

Cryptocurrencies have found millions of early adopters in India, and the number of people jumping on the crypto bandwagon is increasing exponentially every day. But not all investors fully realise the risks involved in the highly volatile crypto market.

With no central resource for credible crypto-related information and no legal recourse in the absence of regulations, these investors might attract scamsters and hackers waiting to trap gullible investors.

Over the last two years, several websites running crypto scams have cropped up and millions of Indians have been duped of their hard-earned money after visiting these sites. In fact, according to recent research by blockchain data platform, Chainalysis, Indians visited crypto scam websites more than 17.8 million times in 2020. While the number of visits reportedly fell sharply in 2021 (to around 9.6 million times) there is still a lot of cause for concern.

Chainalysis also released the names of the top five crypto scam websites visited by Indians--coinpayu.com, adbtc.top, hackertyper.net, dualmine.com, and coingain.app. Roughly 4.6 million Indians visited these sites in 2021 alone.

The problem with these websites is the sheer number of them prevalent on the internet. If one is taken down, another one pops up to take its place. To make things worse, these scamsters also use varying modus operandi. They can dupe investors through email scams, phishing scams, or giveaway scams, and that is just scratching the surface of the different scams that are just a click away on the internet.

In fact, just earlier this month, the Enforcement Directorate (ED) uncovered a scam that led investors in Kerala to a fake cryptocurrency known as Morris Coin. The alleged scam duped victims of their hard-earned money to the tune of Rs 36.72 crore.

Many of these scams also target users on messaging apps like WhatsApp and Telegram by sending users texts about fake offers and giveaways. Unsuspecting investors click on these messages getting duped in the process.

But the good news Is that various entities in the Indian crypto industry are taking charge and starting to implement measures to safeguard investors against such scams. Multiple initiatives are being undertaken to educate investors about these scams.

The Internet and Mobile Association of India (IAMAI), for instance, formed the Blockchain and Crypto Assets Council (BACC) in 2021 to spread awareness about crypto and the various scams involved in this space and to run advocacy operations. The BACC has also been working with the biggest exchanges to mitigate the problem of scams through clear messaging with the public.

Coinswitch Kuber, one of the most popular apps for trading cryptocurrencies, released the ‘Riskometer’ last month to educate users about new coins in the market. The Riskometer gives out a risk warning for highly volatile coins or when the company thinks the users need to be warned about a particular coin before investing. Crypto unicorns in the country like CoinDCX have also stated that they are dedicating substantial resources to combat the problem of scams in the industry.

WazirX CEO Nischal Shetty pointed out that it is time for India to upgrade the financial literacy for the 21st Century. "Cryptocurrencies, in particular, should be a crucial part of the financial literacy programmes," he told the Economic Times.

As part of its effort to help prevent frauds, WazirX complies with BACC's self-regulatory code of conduct under the IAMAI in absence of regulatory guidelines.

With a cryptocurrency bill expected to be presented in the Budget 2022 session in February, crypto may soon become a lot safer in India. However, the onus of safety on the internet still falls heavily on individual investors. One should only make well-informed investment decisions and practice due diligence when trading in crypto, or any other form of investment for that matter.