Confused about cryptocurrencies? You’re not alone. Before you use or invest in cryptocurrency, know what makes it different from cash and other payment methods, and how to spot cryptocurrency scams or detect cryptocurrency accounts that may be compromised.
Cryptocurrency, commonly referred to as crypto, is a type of digital currency that generally only exists electronically unless you use a service that allows you to cash in crypto for a physical token. You usually exchange crypto with someone online, without using an intermediary like a bank. There are many different crypto brands, and new ones are continuously being created.
Some important differences between cryptocurrency and regular currency to take note of:
- Crypto accounts are not backed by a government. Crypto accounts are not insured by the government like a bank account.
- Crypto values change constantly. The value of a crypto can vary rapidly, even changing by the hour. It depends on many factors, including supply and demand.
- Crypto payments are not protected. Credit cards and debit cards have legal protections if something goes wrong, cryptocurrencies typically do not.
- Crypto payments are typically final. Once you pay with cryptocurrency, you can usually only get your money back if the person you paid sends it back.
Since the same protections as regular currency don’t typically apply to cryptocurrency, scammers are always trying to find new ways of robbing people using crypto, and they are succeeding. Here are some crypto scams to watch out for:
- One sure sign of a scam is anyone who says you must pay by cryptocurrency. Anyone who tells you to pay by wire transfer, gift card or cryptocurrency is a scammer. And, if you fall for it, it is nearly impossible to get that money back. This is what the scammers are banking on.
- Any promise that you can earn lots of money in a short time and achieve financial freedom is likely a scam.
- Another known scam is if a company asks you to pay in cryptocurrency for the right to recruit others into a program and offers recruitment rewards paid in cryptocurrency. The more cryptocurrency you pay, the more money they promise you’ll make. They are, indeed, making fake promises and false guarantees in order to entice you to give them your money.
- Be suspicious if you receive an unsolicited offer from a supposed “investment manager” saying they can help you grow your money if you give them the cryptocurrency you’ve bought. Here’s the catch: Once you log in to the “investment account” they opened, you’ll find that you can’t withdraw your money unless you pay fees.
- Be leery of any unsolicited job offers to help recruit cryptocurrency investors, sell cryptocurrency, mine cryptocurrency, or help with converting cash to bitcoin.
- Any jobs on job websites that promise you a job (for a fee), are likely going to end up taking your money or personal information.
- If you read a tweet, text, email, or get a message on social media that tells you to send cryptocurrency, it’s a scam. That’s true even if the message came from someone you know, or was posted by a celebrity you follow. Their social media accounts might have been hacked.
Don’t jump in without doing your research. See what others are saying. Search online for the name of the company and the cryptocurrency name, plus words like “review,” “scam,” or “complaint”. Scammers are counting on you to be unknowledgeable, slightly confused and easily convinced by the game they are running. Your best defense is to educate yourself and be skeptical.
Source: Federal Trade Commission: https://www.consumer.ftc.gov/articles/what-know-about-cryptocurrency-and-scams