Understanding the risks
Many of the big overseas crypto exchanges are unregulated and they operate exclusively online, with no connection to New Zealand.
This makes it hard to find out exactly who is offering, exchanging, buying or selling crypto. It can also make it difficult for you to contact the exchange or make a complaint and it is unlikely you will get your money back if things go wrong.
Crypto and scams
Around a quarter of the warnings published last year by the FMA had a link to crypto. Scammers like using crypto as the transactions move fast and are irreversible, making it harder to trace. It also allows them to hide their identities and activities.
The most common crypto scams are related to fake online crypto investment platforms. These online platforms offer different types of investments in crypto and returns that are often unrealistically high.
Once someone invests with the platform, they are shown a fake dashboard with the “profits” they earned, but these are fake. These fake profits are usually shown to encourage an investor to put in even bigger sums of money.
When the investor then wants to withdraw funds, they are asked to first pay advance fees to cover taxes or commission. Even when these fees are paid, the investor cannot withdraw their funds.
Investors used to come across these fake online crypto investment platforms by searching online for investment opportunities, but it is now common to be introduced to these platforms via social media. This could come from simply clicking on an advertisement, or being invited to invest after meeting a friend or potential love interest online.
So although cryptocurrencies haven’t yet fully transformed the global financial system, they remain a popular investment option for many New Zealand investors. And opting for a platform that is registered here in New Zealand is one great way to improve the security of these investments.
Cryptocurrencies
Disputes and consumer protection
FMA warnings and alerts