China has led the way in technological advances but is also known for cracking down on these same technologies when the Chinese government perceives development has gotten out of hand. This sometimes contradictory approach is seen in China’s shifting position on cryptocurrency.
The Chinese government, on the one hand, was initially supportive of the development of blockchain technology, but it took some of the most aggressive steps in the world to regulate cryptocurrency. However, despite the strict laws limiting cryptocurrencies in China in 2017, crypto scams originating in China are finding ways of operating, in some cases offshore.
One example is the Chinese-led crypto scam Turkish officials discovered in March 2021. Law enforcement arrested the 18 ringleaders who, as reported by the Turkish-language news agency Demirörenon, had taken 101 people captive and forced them to operate the scam. The captives, all Chinese nationals, were forced to get Turkish visas, which were taken away from them so they could not go back to China.
The prisoners were paid a salary of $1,000 a month, were compelled to work long hours and lived in nine villas in the Turkish coastal city of Silivri. These criminal activities were discovered when two of the workers escaped and immediately sought the aid of authorities.
The scam pretended to be a company that would manage cryptocurrencies for clients and provide customer support. They depended on consumers giving them cryptocurrencies or data which they would steal and use for their own purposes. The fake service urged customers to “hand over your virtual currency to us and we will double it and give it back to you.”
This shocking case is just one in a series of cases that demonstrate, rather than preventing cyber criminals from perpetrating crypto scams, the Chinese government’s tight regulations have driven these frauds offshore. A similar type of scam involves Chinese nationals selling fake cryptocurrency products on social media and gaining access to digital currency and data when people clicked on scam links.
The Chinese Regulation of Cryptocurrency
The Chinese government has a complex relationship with cryptocurrency. While it is true some of China’s technology contributed to the development of blockchain technology and it was once a major buyer of bitcoin, its government, which is known for being strict regarding regulations, clamped down on cryptocurrencies and outlawed ICOs or Initial Coin Offerings in 2017 and shut down cryptocurrency exchanges in China.
Recently, it seems that China has relaxed its stance on digital currencies somewhat. Li Bo, the Deputy Governor of The People’s Bank of China declared that bitcoin was an “investment alternative.” Although Li Bo did not encourage bitcoin as a form of currency, he did indicate a more open attitude to cryptocurrency trading.
Bo’s statement sent mixed signals about the future of cryptocurrency in China. Although he maintained that the central bank will retain its regulations on cryptocurrencies, he hinted that China was “still looking into” what kind of regulations to impose, “maybe minimal.” He reaffirmed The People’s Bank of China’s concern about speculation and creating financial risks with cryptocurrency trading. There is talk that China will introduce a digital yuan in 2022.
The Dilemma of Cryptocurrency
China’s ever-changing position on cryptocurrency reflects the feelings of many governments and individuals regarding on the one hand wanting to take advantage of a significant opportunity and concern over risks, volatility, and crypto scams.
The Chinese government, by taking steps towards introducing a digital version of the yuan and relaxing regulations on cryptocurrency, is showing it wants to participate in the digital currency trend, but there is a concern that the kind of crypto scams that went offshore, such as the fraud described in Turkey, will return to mainland China.
The attraction of cryptocurrency is that it provides freedom from government regulation, which is something many governments, especially the Chinese government, may find threatening.
There are proposals around the world to attempt to regulate the cryptocurrency market, but since no government has control over the blockchain, there is little they can do to prevent problems from arising. They must resort to having law enforcement crack down on scams after they are discovered because they are not in a strong position to prevent crypto scams.
How To Avoid Crypto Scams
Since it is clear that even when governments intend to crack down on crypto scams, their lack of control over the blockchain and crypto technology means there is little they can do in reality to prevent these types of crime. This means that consumers need to take the responsibility to do their due diligence and educate themselves about crypto scams and take steps to avoid them.
Trader Defense Advisory recommends taking the following steps to avoid becoming a victim of crypto scams:
- Avoid “deals”’ involving cryptocurrency with extravagant claims about becoming rich
- Do not hand over your bitcoin or codes to anyone
- Be suspicious of spam or unsolicited messages from people you don’t know with a cryptocurrency scheme
- Verify all cryptocurrency services and brokers by conducting a background check. Confirm all contact information, company history and licenses
- Do not click on links that are sent to you by parties you are not already in regular contact with. If you are invited to visit a site and want to check it out, type the address manually in your browser
- Keep in mind that cryptocurrency is volatile and the market moves quickly. Reject any offer from a broker who claims to “guarantee” consistent high returns on your investment.
As those who create crypto scams become more creative in their strategies, there is no guarantee that even with these precautions you will be 100% safe from fraud, but they will dramatically reduce your chances of losing money and data to a crypto scam.
If You Have Been the Target of a Crypto Scam, Talk to Trader Defense Advisory.
Trader Defense Advisory professionals are well-versed in the process of reporting fraudulent brokers, crypto scams, and identity theft. They help clients individually through the procedure of filing a claim and reporting their case to the authorities. TDA experts have combined decades of experience with banks and financial regulators that can track down fraudulent parties and help clients recover from identity theft and other types of fraud. We have a proven track record of success in assisting clients with winning claims and helping clients reclaim their identity.