Many credible, global media explored issues related to digital currencies and published articles making readers aware of the risks related to bitcoin.
Just like digital currencies are relatively new and innovative means of payment, the cryptocurrency industry is still unregulated. It is hard therefore to objectively differentiate between right and wrong practices for using, trading or paying with cryptocurrencies. The exception are those territories, where the regulator has already put a legal framework in place such as in the US, EU and most recently – China and Japan.
This is the main reason for the numerous warnings issued worldwide by banks and financial institutions, warning consumers of the risks when using unregulated payment means.
The buzz surrounding bitcoin and cryptocurrencies has made media outlets curious and they quickly found out that this innovative transactions method and the technology behind it are a great topic to explore. Besides the good news about the advantages of the blockchain and the profits related to the volatile price of bitcoin, the scandalous side of cryptocurrencies – related to speculation, hacking attacks, black market usage, Ponzi schemes, fraud and other criminal activities – quickly captured the attention not only of media but also of mass consumers, financial institutions and the regulators.
Limitations of cryptocurrencies and cases of cryptocurrency scams
Many credible, global media explored issues related to digital currencies and published articles making readers aware of the risks related to bitcoin. To name a few of the numerous examples, in 2015 Investopedia posted a text named “Beware of these Five Bitcoin Scams” in which they listed five of the most common scams involving bitcoin. Among them, there are bitcoin Ponzi schemes and high-yield investment programs, bitcoin mining investment scams, bitcoin wallet scams, bitcoin exchange scams and bitcoin phishing scams. The article gives information about each of these scams and additionally gives instructions of how to avoid them.
A recent article that appeared in Forbes “How to spot a bitcoin fraud” 2 months ago, explores a popular reason for a company to be pointed out as a scam, highlighting that: “Whenever something gets hot, the only guarantee is that scamsters will lock onto it like a heat-seeking missile. The virtual currency bitcoin is no exception.”
Yahoo! Finance also published similar alert just a month ago – “Bitcoin scams: don’t fall victim to them!”. The article gives information about each possible fraud with the currency and advises how a customer can prevent the possibility of falling a victim to a fraud, when using digital currency.
The alert of scam could be two types. It can be a warning targeting cryptocurrencies in general but it can also be an alert related to a particular example of a fraud – just like the BCST Ponzi or the recent Ecoin Plus Ponzi schemes.
Additionally, another media giant, Fortune, published an article titled “Bit Con? Veteran fraud expert sets his sights on bitcoin”, in which the known fraud expert Jeffrey Robinson, expresses his doubts about bitcoin. However he also distinguishes between the value of coin from the value of the technology behind it – the blockchain:
“It’s a con in that it’s not a real currency, but let me back up. There are actually two bitcoins. There’s the blockchain-technology bitcoin, which I think is fantastic, and the future, and all sorts of businesses are investing tens or hundreds of millions of dollars in Silicon Valley and around the world to build businesses on the back of the blockchain technology because it’s so wonderful and can move assets frictionlessly. But then there is this aspect of the pretend currency and the pretend commodity. Part of the con is in the pretend commodity, because this is a completely shallow, liquidless market.”
By separating the understanding of bitcoin as a means of making transfers from the technology undermining it, the blockchain, Jeffrey Robinson clearly differentiates the technological advancements from the risks related to the coin.
However even companies, with a traditional business structure can become a target of rivals, claiming the business is scam. Such company can be pressed to engage in time consuming legal battles and to accumulate high costs in order to prove the legitimacy of its business. But because Ponzi schemes are hard to spot and find a proof of before they collapse, legitimate companies can become a black publicity target, claiming they are a scam. By involving them in a scandal, rival companies usually aim to destroy their reputation and corporate identity, thus affecting their sales and business operations.
For the past few months the topic of fake news has become extremely popular in certain industries and in politics. The aim to ruin the reputation of targeted companies or public figures has been a major media topic. When repeated multiple times, fake news may also lead authorities to fruitless actions thus using taxpayers money in vain. The ethical problem linked of fake news should therefore be addressed and by regulators.
The evolving perception of cryptocurrencies
The perception of cryptocurrency is related to the way media and online blogging have presents the debate surrounding it. The older the articles, the more alerts were published about bitcoin being a Ponzi scheme or a fraud as a concept. Some years later, a deeper understanding emerged with more and more companies adopting the blockchain in their operations. Users, developers and investors began sharing their experience with bitcoin. This shared knowledge affected the perception about it, especially when more and more influencers and conferences spread the word and the community expanded.
In other words, innovations need time to be understood and accepted. This is the path of cryptocurrency companies as well – skepticism, denial and fears not only by the mass user but by the regulator as well. However, with time, as the technology develops and people become aware of it, perceptions can change.
But there is also another side of the way cryptocurrencies are presented online today
Our online research showed that the bitcoin lobby, operators and enthusiasts are extremely hostile and openly aggressive to publications clearly showing the deficiencies of bitcoin. Compared to the volume of online publicity on the matter of various bitcoin Ponzi and fraud schemes, the wikipedia profile of bitcoin in its “Criminal Activity” part has a very brief description of its limitations and the scale of financial institutions’ warnings, cases of money laundering, Ponzi schemes, black markets, hacked exchanges and trapped transactions, including people losing their coins, which may become a problem for the open-source media if this fact is linked to a case of white washing. These issues also affect the perception of cryptocurrencies and highlight the problem of transparency, safety and security of transactions, and bitcoins – issues on which regulators have focused on multiple geographic locations in order to guarantee the safety of consumers.
The destiny of companies operating in innovative industries
A research focused on exploring the pharmaceutical industry addresses similar issues but in this case linked to pharma scams. Truth Theory examines “The Big Pharmaceutical Scam – 7 Shocking Truths About Big Pharma”. The research done exposes the ugly face of pharmaceutical business. Luke Miller defines his Truth Theory like that:
“I believe that a lot of pharmaceutical drugs are dangerous & an industry that makes money from us being sick should never be in charge of making us healthy. Pharmaceutical “companies” are just that – companies. So if there was a miracle tablet that made us all healthy & they released it they would lose trillions of dollars. So just from a business standpoint, it makes no sense for them to make us healthy.”
And he finishes his statement with:
“I am not saying all pharmaceutical drugs are bad, I am saying that they may not be the best option.”
Luke Miller exposes 7 shocking truths about pharma with specific examples of lobbying, extortionate pricing, distribution and spreading of false information for own profit, resulting in dangerous practices, causing poor health and even death to thousands of people. In fact, pharmaceutical frauds vary so widely that even a Wikipedia article tries to collect and explain them. The reasons about the questionable trust in the industry are also explored in the Forbes article titled “Is Big Pharma Addicted To Fraud?”.
Who has an interest to spread fake news?
Shady practices are extremely profitable to the pharmaceutical industry and therefore to the whole government and national revenue in the form of fees. Fake news are simply part of the game – the false and dangerous information is being easily spread and established as a norm.
The big question is – who benefits from spreading fake news about legit businesses, claiming they are fraud, Ponzi or a scam?
Just like pharma companies, cryptocurrency companies are an easy target. Pharma companies – because of their practices and the sensitive issues of illness for their customers. Cryptocurrencies – mainly because of the highly unregulated industry, new and hard to comprehend technological topics as well as the extremely aggressive rival polemic. The problem is that no one but the one spreading fake news profits from this situation. Definitely neither the user, nor the regulator or financial institutions gain from a publicity war and more often than not institutions are involved in a publicity war that is hard for them to comprehend.
Can legal development setting the legal frame defining cryptocurrencies help the debate?
Recent legal developments in Japan and Russia suggest the acceptance of cryptocurrencies as a financial instrument. The reason is that by designing compliance systems able to guarantee the transparency and safety of transactions, cryptocurrencies will have to comply with AML and consumer safety regulator requirements. The most recent legal development in Japan recognizes cryptocurrencies as a commodity, thus making them subjects to various taxes.