In the recent past, scammers would request wire transfers or gift cards to receive money—as they are irreversible, anonymous and untraceable. However, such payment methods do require potential victims to leave their homes, where they might encounter a third party who can intervene and possibly stop them. Crypto, on the other hand, can be purchased from anywhere at any time.
Indeed, Bitcoin has become the most common currency requested in ransomware cases, being demanded in close to 98% of cases. According to the U.K. National Cyber Security Center, sextortion scams often request individuals to pay in Bitcoin and other cryptocurrencies. Romance scams targeting younger adults are increasingly using cryptocurrency as part of the scam.
If someone is asking you to transfer money to them via cryptocurrency, you should see a giant red flag.
The Wild West
In the field of financial exploitation, more work has been done to study and educate elderly scam victims, because of the high levels of vulnerability in this group. Research has identified common traits that make someone especially vulnerable to scam solicitations. They include differences in cognitive ability, education, risk-taking and self-control.
Of course, younger adults can also be vulnerable and indeed are becoming victims, too. There is a clear need to broaden education campaigns to include all age groups, including young, educated, well-off investors. We believe authorities need to step up and employ new methods of protection. For example, the regulations that currently apply to financial advice and products could be extended to the cryptocurrency environment. Data scientists also need to better track and trace fraudulent activities.
Cryptocurrency scams are especially painful because the probability of retrieving lost funds is close to zero. For now, cryptocurrencies have no oversight. They are simply the Wild West of the financial world.
Yaniv Hanoch is an associate professor in risk management at the University of Southampton. Stacey Wood is a professor of psychology at Scripps College.
