While cryptocurrency may be a hot topic these days, most people are still trying to wrap their heads around all the complex and often confusing definitions out there. If that’s you, you’re not alone. Check out our guide to learn the basics and how to protect yourself against crypto scams.
Understanding Cryptocurrency and Related Scams
Have you been hearing a lot about cryptocurrency lately but you’re not sure what it is? You’re not alone. Check out this guide to help you navigate the evolving world of cryptocurrency.
What is cryptocurrency?
Cryptocurrencies are digital assets, which may be a medium of exchange. Cryptocurrencies are not issued by a central bank so there is no central authority (like the U.S. Federal Reserve) that manages or upholds their value.
While cryptocurrency, and other digital assets, are a budding space that may open the door to more inclusive and easier ways to manage, share, and lend money, the U.S. Federal government is still in the process of examining their risks and benefits for consumers.
Not federally insured
If the crypto company that holds your funds goes out of business, your money may be lost and never recovered.
Not federally regulated
Without such regulations there are no legal standards for consumer protection issues such as privacy and security.
While some consumers use cryptocurrencies to pay for things, others use it as part of their investment strategy, hoping they increase in value. But like any investment, this is not a sure thing! The value of cryptocurrencies can be erratic and adjust rapidly; therefore, they are considered a high-risk investment. Because investing in cryptocurrencies is speculative, you should only buy what you can afford to lose.
Cryptocurrency Investment Scams
According to the FTC, investment scams are one of the top ways scammers trick you into buying cryptocurrency.
Here are a few examples of common cryptocurrency scams:
A “money manager,” old friend, or stranger reaches out to you about a zero-risk investment opportunity that will make you rich. They send you a link, QR code, or login and once your money is transferred, it disappears and you’re unable to access it.
Blackmail or Family Scams
Scammers will reach out to you saying they have compromising information about you or a loved one or that your loved one is in danger if you don’t send them money.
Sometimes scammers impersonate the federal government, law enforcement, or a business like a bill collector. They scare you into believing you owe money and will be prosecuted unless you buy cryptocurrency on the spot.
Scammers often prey on people who are looking for love, particularly on dating websites. They tell tales about needing a loan or offer get rich quick investment ideas. After getting your money, they’re gone.
Protect yourself by remembering that no government agency or legitimate business will reach out to you via social media or text. Also keep in mind, that it is never safe to send money to a love interest you’ve never met or just know through the internet. Stay vigilant. Do your research. And remember, if something sounds too good to be true, it probably is.
To report crypto-related scams, contact the FTC at ReportFraud.ftc.gov (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).)
Click this link to download a printable version of this guide.
Still have questions about cryptocurrency? View this video for answers to common questions.