What you need to know about cryptocurrencies
What is a cryptocurrency?
Cryptocurrency, also called virtual currency, is a type of digital currency that only exists electronically. Generally, to buy cryptocurrency you use your phone, computer, or a cryptocurrency ATM. The most well-known cryptocurrencies are Bitcoin and Ether, but there are several different brands, and new cryptocurrencies are continually being created.
How do people use cryptocurrencies?
People use cryptocurrencies for many reasons, to make quick payments, to avoid transaction fees charged by traditional banks, or because they offer some anonymity. Other people might buy and hold cryptocurrency as an investment, hoping it will increase in value.
How can you get cryptocurrencies?
You can buy cryptocurrency through an exchange, a website or a cryptocurrency ATM. Some people can acquire cryptocurrencies through a complex process called “mining” or “mining” for which advanced computer equipment is needed to solve very complicated mathematical problems.
Where and how are cryptocurrencies stored?
Cryptocurrencies are stored in a digital wallet or wallet, either online, on your computer, or on another external physical medium. A digital wallet or wallet has an address, which is usually a long string of numbers and letters. If something happens to your cryptocurrency wallet or funds, for example if the online exchange you use goes down, you send cryptocurrency to the wrong person, you lose your digital wallet password, it’s stolen or If there is a problem with your digital wallet, you may find that no one is available to help you recover your funds.
What are the differences between the cryptocurrency and the US dollar?
Since cryptocurrencies only exist online, there are important differences between cryptocurrencies and traditional currencies, such as the US dollar.
- Cryptocurrency accounts are not backed by a government. Cryptocurrency held in accounts is not government insured like US dollars deposited in an FDIC-insured bank account are. If something happens to your account or your cryptocurrency funds, for example, the company that provides the storage service for your virtual wallet goes out of business or suffers a hack, the government is under no obligation to intervene to help you get your money back. .
- The value of a cryptocurrency is constantly changing. The value of a cryptocurrency can change rapidly, even hourly. And the amount of that fluctuation can be considerable. Its value depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than traditional investments like stocks and bonds. An investment that is worth thousands of dollars today might be worth only a few hundred dollars tomorrow. And if the value goes down, there is no guarantee that it will go back up.
Pay with cryptocurrencies?
There are many differences between paying with a cryptocurrency and paying with a credit card or other traditional payment methods.
- Cryptocurrency payments have no legal protections. Credit and debit cards have legal protections if problems arise. For example, if you need to dispute a purchase , your credit card company has a process to help you get your money back. Cryptocurrencies generally do not have those same protections.
- Generally, cryptocurrency payments are irreversible. Once you pay someone with cryptocurrency, you can usually only get your money back if the person you paid returns it to you. Before you buy something with cryptocurrency, find out the reputation of the seller by doing a little research before paying.
- Some of the information about your transactions is likely to be public.People often say that cryptocurrency transactions are anonymous. But the truth is not so simple. Typically, cryptocurrency transactions are recorded on a public record called a “blockchain.” That is a public list of each cryptocurrency transaction that contains details of the payer and the recipient of the payment. Depending on the blockchain, the information that is recorded in that registry may include details such as the amount of the transaction, as well as the digital wallet addresses of the sender and recipient of the payment. Sometimes it is possible to identify the persons involved in a specific transaction using transaction and portfolio information. And when you buy something from a seller who asks you for other information, for example, a delivery address,
How to avoid cryptocurrency scams
Scammers are always looking for ways to steal money from you using cryptocurrency. Here are some things to know to avoid a cryptocurrency scam.
- Only scammers demand cryptocurrency payments. No legitimate business is going to require you to send cryptocurrency up front, either to buy something or to protect your money. That is always a scam.
- Only scammers will guarantee you profit or high returns. Do not trust people who promise you that you can make money quickly and easily in the cryptocurrency market.
- Never mix online dating with investment advice. If you meet someone on a dating site or app, and then want to teach them how to invest in cryptocurrency, or ask them to send you cryptocurrency, it’s a scam.
Spot cryptocurrency scams
Scammers are using the same tried and true tactics, only now they are demanding payment in cryptocurrency. Investment scams are one of the main ways scammers use to trick you into buying cryptocurrency and sending it to scammers. But scammers are also posing as representatives of businesses, government agencies, romantic relationships, and other tactics.
Investment scams often promise you that you can “make big money” with “zero risk,” and these scams often start on social media or dating apps or sites. Of course these scams also start with a text, email or call. And in investment scams, cryptocurrency plays a central role in two ways: it can be both for investment and for payment.
Here are some of the common investment scams and how to spot them.
- A so-called “investment manager” contacts you unexpectedly. It promises to multiply your money, but only if you buy cryptocurrency and transfer it to your online account. The investment website you are directed to looks real, but it is really fake, just like its promises. If you log into your “investment account”, you won’t be able to withdraw your money at all, or you will only be able to do so if you pay high fees.
- A scammer poses as a celebrity who can multiply the cryptocurrency you send them. But there is no famous person who is communicating with you through social media. He’s a scammer. And if you click on an unexpected link sent to you or send cryptocurrency to a supposed celebrity’s QR code, that money goes straight into a scammer’s pocket and is gone.
- A virtual “crush” wants you to send him money or cryptocurrency to help him invest. It is a scam. As soon as someone you meet on a dating site or app asks you for money, or offers investment advice, you know they’re a scammer. Advice and offers to help you invest in cryptocurrency are nothing but scams. If you send him cryptocurrency, or any other form of money, it’s gone, and you usually won’t get it back.
- Scammers guarantee you will make money or promise guaranteed high returns. No one can give you those guarantees. Let alone in a short period of time. And when it comes to cryptocurrency investing, there is no such thing as “low risk”. So if a company or person promises you a profit, it’s a scam. Even if they are endorsed by famous people or testimonials from happy investors. That is something that can be easily faked.
- Scammers promise free money . They will promise free cash or cryptocurrency, but the promises of free money are always false.
- Scammers make big claims without details or explanations. Whatever the investment, find out how it works and ask where your money will go. Honest investment managers or advisors will be willing to share that information and back it up with details.
Before investing in cryptocurrencies, do an online search by entering the name of the company or person and the name of the cryptocurrency and adding words like “review”, “scam” or “complaint”; If you do the search in Spanish, replace those words with “comment”, “stafa” or “queja”. Read the opinions of other people. And read more about other common investment scams .
Business impersonators, government agencies, and job seekers
In a scam carried out by people posing as business representatives, government agencies or job seekers, the scammer pretends to be someone you trust in order to convince you to send money by buying and sending cryptocurrency.
- Scammers pose as well-known companies. This comes in waves, depending on the moment, and scammers might say they work for Amazon, Microsoft, FedEx, your bank, or something else. This type of scammer will send you a text, email, or communicate by phone or through social media messaging, or perhaps put a pop-up alert on your computer. They might tell you that fraud has occurred on your account, or that your money is at risk, and that to fix the problem, you need to buy cryptocurrency and send it to them. But that’s a scam. If you click on a link in a message, answer the call, or call the number in the pop-up window, you will be contacting a scammer.
- Scammers pose as representatives of new or established businesses offering fraudulent crypto coins and tokens. They will say that the company is entering the crypto world and for this they are issuing their own virtual currency or token. To back up this argument and trick people into buying that coin, they could run social media ads, newspaper articles, or set up a fancy website. But those coins and crypto tokens are a scam that ends up stealing money from the people who buy them. Do research online to find out if a company has issued a coin or token. If true, it will be widely reported by the established media.
- Scammers pose as representatives of government agencies, law enforcement, or utility companies.These scammers may tell you that there is a legal problem, that you owe money, or that your accounts or benefits have been frozen as a result of an investigation. They tell you to fix the problem or protect your money by buying cryptocurrency. They may tell you to send them to a certain wallet or virtual wallet address for “protection and safekeeping”. There have even been a few cases where scammers stay on the phone directing a person to a cryptocurrency ATM and giving them step-by-step instructions on how to insert the money and convert it into cryptocurrency. They then tell you to send the cryptocurrency by scanning a certain QR code, through which the payment is sent directly to the scammer’s virtual wallet, and then disappears.
- Scammers post fake jobs on employment websites.They might even send unsolicited cryptocurrency-related job offers to help recruit investors, sell or mine cryptocurrency, or help convert cash into cryptocurrency. But those so-called “jobs” only come true if you pay a fee in cryptocurrency. Which is always, always, a scam. As your first assignment at your “job”, these scammers send you a check to deposit into your bank account. (After a short time, it will be discovered that the check was fake.) They will tell you to withdraw a portion of that money, use it to buy crypto for a made-up “customer,” and send the crypto to an account they tell you. But if you do, the money will disappear, and you will have to pay that money back to the bank.
To avoid copycats from businesses, government agencies, and job offers, you need to know the following:
- No legitimate business or government agency will ever send you an email, text, or post on social media asking for money. And they will never require you to buy cryptocurrency or pay with a virtual currency.
- Never click on a link in an unexpected text or email message or through social media messages, even if it appears to be from a company you know.
- Don’t pay someone who unexpectedly contacts you and demands a payment in cryptocurrency.
- Never pay a fee to get a job. If someone asks you to pay upfront to get a job or tells you to buy cryptocurrency as part of a job, it’s a scam.
Scammers may send emails or correspondence through the US Postal Service claiming they have embarrassing or compromising photos, videos, or personal information about you. Then they threaten to make them public unless you pay them with a cryptocurrency. Do not do it. This is blackmail and a criminal extortion attempt. Report the incident immediately to the FBI .
How to report cryptocurrency scams
Report fraud and other suspicious activity involving cryptocurrency to:
- The FTC at ReportFraude.ftc.gov .
- The Commodity Forward Trading Commission (CFTC) at CFTC.gov/complaint .
- The US Securities and Exchange Commission (SEC) at sec.gov/tcr .
- The center that receives complaints about crimes committed on the Internet called the Crime Complaint Center (IC3) available at ic3.gov/Home/FileComplaint .
- The cryptocurrency exchange company you used to send the money.