The House Committee on Oversight and Reform is pressuring authorities and cryptocurrency exchanges to defend citizens from crypto scammers.
The committee asked Coinbase, FTX, Binance.US, Kraken, and KuCoin what they are doing to safeguard customers from scams and halt cryptocurrency-related fraud in a series of letters addressed Tuesday morning to the Treasury, the FTC, the CFTC, and the SEC.
How Do Crypto Scammers Work
Scammers have profited as a result of frequent reports of growing prices and unexpected wealth. This has attracted both experienced and novice investors to cryptocurrencies. Because there is no central authority that can flag suspicious transactions, transactions made with cryptocurrencies cannot be reversed, and most people are unaware of how they operate, fraudsters prefer to use this for their dirty games.
The letters want responses from the government and bitcoin exchanges by September 12 with suggestions for safeguarding users. The committee said that these answers could help make laws.
The letters want records from the exchanges that go back to January 1, 2009 that demonstrate what companies have done to combat cryptocurrency fraud and scams, “detect, investigate, or flag possible fake digital assets or accounts,” and discuss the adoption of stronger regulations.
The committee claims that although some exchanges assess cryptocurrencies before listing them, others do not (in a letter to Sam Bankman-Fried, CEO and creator of FTX).
37% of the money made by crypto scams last year came from “rug pulls.” This is when people announce a token on an exchange, make a big deal out of it, and then disappear.
Since Voyager Digital and Celsius filed for bankruptcy, worries regarding the security of cryptocurrency assets kept on centralized systems have increased. Retail traders preferred these two systems because they consistently provided returns in the double digits. The demise of these two platforms raises the issue of who really has ownership of bitcoin assets when a company holding them fails. Customers do not have an assurance that their money would be returned since they are not federally insured bank depositors in the bankruptcy proceedings for Voyager and Celsius.
Investor-crypto exchange rules might alter. According to Coinbase, its clients would be considered “general unsecured creditors” in the case of bankruptcy.
