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Crypto is booming — here are 5 ways to make sure you don’t get scammed

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Crypto is booming. Since its creation in 2008, cryptocurrencies, other crypto assets, and blockchain technology have disrupted the way we think about money and decentralized systems. There’s been growing widespread adoption of the technologies, more investments poured into crypto projects, and increasing legitimization of the industry. Big companies have been incorporating crypto into their portfolios, and even the recent pop of Bitcoin and Ethereum in the market is now attracting new investors.

Once people figured out what crypto was and the value it offered, it seemed like nothing was going to stop its forward march — nothing except for scams, which could derail the entire industry.

As crypto grew, so did the schemes intending to defraud naïve investors. A recent report, the “Crypto Investor Scam Report,” details the ways over $16 billion has been stolen from investors through various scams since 2012. Due to the deregulated nature of crypto, that’s money that those investors can’t get back. What’s even more jarring is that those projects were out to deliberately take advantage of uneducated investors wanting to get involved in crypto, and many founders simply disappeared overnight, leaving notes that they had taken the money and ran. Some have been arrested and charged, but many haven’t.

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In looking at examples of big crypto scams, we see a common lure: The promise of high returns. This could be through investing money with one person who’s created special trading software. Or it could be through a kind of multi-level marketing scheme, where crypto investors receive rewards for referrals. It could also be through crypto projects that ended up as stand-alone coins and exchanges with no use case for the coins other than to be passed back and forth like trading cards. 

Because crypto scams have displayed pretty distinct red flags, here are some things that investors can watch for so they don’t get scammed. 

1. Get Rich Quick on High Returns

Some of the biggest crypto scams, like BitConnect and PlusToken, made massive promises of high returns — upwards of 1% per day, which is very promising but unsustainable. While many high risk investments yield high returns, crypto projects promising this kind of return typically end up borrowing back and forth from investors without having any established coin or structure to generate the returns. Seeing high returns from established coins like Bitcoin and Ethereum is one thing, but stay away from investing in new coins with these kinds of promises.

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 2. No White Paper or Proven Model

Every crypto project should have a white paper or a proof of concept demonstrating what they hope to accomplish. Satoshi Nakamoto’s 2008 white paper that established Bitcoin and blockchain technology is considered airtight and sets an industry standard for other crypto projects. It should be a red flag for an investor if the white paper is badly compiled, not well thought out, plagiarized, or if there’s no white paper at all. The same thing goes for a working business model. Can the crypto project demonstrate that they can do what they promise, that they’ve thought through coin adoption, or have an established blockchain? If they can’t, there’s another red flag that the project might not exist beyond the hype. 

3. Shady Team with Low Credibility

Find out about the team behind the crypto project. Is the team more than just one person who has claimed to have created special trading software, or who will promise to manage a crypto portfolio for you? Look for a solid team with diverse, credible backgrounds who can be searchable on other sites to corroborate who they are. Big red flags are if the team has a history of criminal activity, like the team behind the WoToken scam, or if there’s no one to be found behind the project and they want to stay anonymous, like the BitConnect scam. 

4. Huge Promotions and Hype

Another red flag is if the crypto project runs huge promotions, flashy events, and hypes a fear of missing out if you don’t buy into their project. Typically the flash and fanfare are there to hide the fact that there’s no working business model, or to cover up a lack of knowledge or experience. Unfortunately, the hype can be a great lure to someone who fears they may miss out on the “next big thing,” but savvy investors will see it as a red flag.

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 5. Money is Only Made Through Referrals

Finally, beware of crypto projects where investors can only really earn returns through referrals, and not through any revenue or dividend from the actual project. This kind of structure is fundamental to a pyramid scheme or a multi-level marketing scheme, where the system is only supported by more and more people investing, and not through product returns. 

Looking Forward

The cryptocurrency industry relies on investors to help crypto become institutionalized, and gain more credibility and legitimacy in the marketplace. While there are indeed scam projects out there, knowledgeable investors will be able to spot them and turn their money towards worthwhile, serious projects that can push the industry forward.

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Central Bank of Spain requires cryptocurrency companies to register in the country

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The Bank of Spain (BDE) made available on Thursday (21) an electronic form for registering individuals and companies wishing to initiate or formalize operations with cryptocurrencies. The call comes a week after the agency formally sent a notice on the subject to the country’s financial institutions.

According to the BDE, registration is mandatory for companies operating in the cryptocurrency sector, regardless of whether they already have registration with the country’s central financial agency, that is, even banks. Such a requirement could confuse financial entities already licensed in Spain, as they are already directly supervised, Coindesk commented.

“The obligation to register in this form applies to all individuals or legal entities that provide exchange services between virtual and fiduciary currency and custody, regardless of whether they are also registered in other administrative records at the Bank of Spain or other competent authorities”, says a short excerpt from the BDE instructions.

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Another point is what clarifies the BDE about the registration of individuals who work in the exchange service in Spain, such as P2Ps. Something that the central bank makes clear is that these actors must register “regardless of the location of the service recipients”. However, both individuals and corporations will have to adapt or revise their money laundering policy.

Entities now have one week to start the registration process and deliver documentation. The BDE advises that “it is advisable to submit all documents complete from the start to avoid delays in processing the order”.

Cryptocurrencies in Spain

About four months ago, the BDE said it would provide instructions and the necessary forms to apply for registration. But the instructions have only just arrived, with just 7 days to go before the registration deadline.

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Another point of action by the BDE is the lack of clarity, since the entity works as the country’s central bank, but under the supervision of the European Central Bank (ECB).

The Spanish bank BBVA, for example, already has a bitcoin trading and custody service in Switzerland. CaixaBank, the third largest Spanish bank, is also preparing to explore the cryptocurrency sector with startup Onyze.

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This Is What Jack Dorsey’s Cryptic ‘705742’ Tweet Might Mean

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A simple but cryptic tweet from Jack Dorsey, Founder and CEO of Twitter and payments firm Square, has sparked a debate about the meaning of the post, and whether the well-known Bitcoin (BTC) advocate has any BTC-related plans that have yet to be announced.

As pointed out by many users replying to the thread, the tweet, saying just “705742,” likely refers to a block number on the Bitcoin blockchain. A block with that number was indeed mined on Tuesday at 20:14 UTC, but it is still unknown what else is special about the particular block.

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Twitter users were quick to pull up the bitcoin block explorer to see if there was anything unusual about block 705742, which at that point had yet to be mined. However, little out of the ordinary could be found.

Others, meanwhile, joked that the number could be Dorsey’s “[end of year] price target for bitcoin,” or that it could be somehow related to “Moscow time,” – bitcoin slang for the value of 1 USD in satoshis.

Speculating further, one user on Reddit suggested that the block number could be the first block to be mined by a new mining system that Dorsey has proposed.

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“Maybe the first block that Square mined as part of their [research & development] for a potential public mining platform,” the user wrote, before adding that it looks like the wallet that received the block reward already has both in and outbound transactions worth almost USD 2bn. “Seems like a plausible volume for Square/Cashapp,” the user added.

However, according to various Bitcoin blockchain explorers, the block in question included 2,787 transactions and was actually mined by the BTC.com pool. Moreover, the block was mined almost an hour after the tweet was published.

In either case, as reported, the latest tweet from the Twitter CEO followed another thread from last Friday, where Dorsey said that Square is considering building “a bitcoin mining system based on custom silicon and open source.” 

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“Mining needs to be more distributed” and it “should be as easy as plugging a rig into a power source,” Dorsey wrote, asking his followers what the biggest barriers are for people who want to run miners.

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Facebook Finally Launches Digital Currency Wallet Novi but Senators Want to Close This Project

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Amid the Facebook Novi launch, some federal legislators want the social media giant to discontinue the project.

Facebook Inc (NASDAQ: FB) has launched the pilot phase of its digital currency wallet Novi in the US and Guatemala using stablecoin Paxos. Facebook finally launches Novi and is going with Paxos’ USDP after its own native crypto Diem failed to secure regulatory approval. Furthermore, the social media giant heralded the pilot launch in a blog post on Tuesday.

Novi’s pilot launch is more than two years after it was first announced. The wallet will facilitate fast, secure, and free fund transfers between users via mobile smartphone apps. However, all users must register with government-issued identification.

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For now, Paxos’ stablecoin will serve as Novi’s transactional currency, while powerhouse exchange Coinbase will provide custodial services. According to David Marcus, head of Facebook’s Novi wallet, this pilot phase will, “test core feature functions, and operational capabilities in customer care and compliance.” Furthermore, it will test the viability of stablecoins as a valid and sustainable form of payment.

Facebook Launches Novi to the Disapproval of US Congress

Amid the Facebook Novi launch, some federal legislators are calling for the social media giant to discontinue the project. Senate Democrats addressed a letter to Facebook CEO Mark Zuckerberg on Tuesday questioning the company’s credibility with crypto. In their own words, Facebook “cannot be trusted to manage cryptocurrency”. The senators base this conviction on the social media company’s past inadequacies in handling cyber risks and keeping consumers protected. Signed by Senators Brian Schatz, Sherrod Brown, Elizabeth Warren, and others, the letter read:

“Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general.”

Part of the Congress letter to Facebook further states:

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“We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”

Facebook responded to the Senators’ query through a spokesperson for Novi, suggesting that the company would address the issues raised therein.

Facebook Has a Long-Running History with Federal Lawmakers over Its Operational Practices

In recent times, Zuckerberg and Facebook have locked horns more frequently with Congress. Back in 2019, Congress summoned the Facebook CEO to provide testimony on the Diem project (then called Libra). Zuckerberg’s summoning was the culmination of weeks of tussling, between Facebook and the federal lawmakers, who were skeptical of the project. In addition, the Zuckerberg hearing came just a year after Facebook’s Cambridge Analytica scandal. This may have been another reason federal legislators were agitated against the company.

Another recent red flag raised against Facebook was earlier this month from whistleblower Frances Haugen. Haugen appeared before the Senate Commerce Committee to testify on the threat Facebook posed to users. Some of these include the usage of Facebook itself and other affiliated services, such as photo and video-sharing behemoth Instagram.

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