Cryptocurrency Fraud Is Growing Fast And Consumers Must Be Protected | Opinion

The cryptocurrency revolution began with the launch of Bitcoin in 2009, fueled by a rejection of pre-existing, centralized banking institutions in the wake of the economic crisis of 2008. Thirteen years later, cryptocurrency markets have grown to an assessed value exceeding $900 billion, but they have also created opportunities for new forms of fraud to emerge, such as that faced by Cy, a 52-year-old San Francisco man who was conned out of more than $1 million.

Cy is far from alone, as the Federal Trade Commission (FTC) has projected that consumers are on track to lose more than $1 billion this year to cryptocurrency scams. In May, the agency also reported that consumers had sent more than $2 million to impersonators pretending to be Elon Musk over the previous six months, and that 7,000 had reported losses of more than $80 million from other cryptocurrency scams.

Americans already recognize the problem is growing. According to a recent YouGov poll, more than four times as many Americans want more oversight of cryptocurrencies than those who don't. Furthermore, the same poll found that most Americans believe cryptocurrencies are more often than not used for criminal activity, a belief likely encouraged by their growing use in scams, which undercuts legitimate growth of these assets.

While government agencies have begun to recognize the need to combat crypto fraud, it's clear that the frequency of cryptocurrency fraud is outpacing the ability of consumer watchdogs to police it. That's why, as chair of the House Oversight Subcommittee on Economic and Consumer Policy, I launched an investigation in August into federal efforts to combat cryptocurrency related fraud and scams, requesting information from the U.S. Department of Treasury, Securities and Exchange Commission, Commodity Futures Trading Commission, and Federal Trade Commission, as well as five leading digital asset exchanges.

Despite the dramatic growth of cryptocurrencies in recent years, there is still no clear central authority that monitors suspicious crypto transactions in many situations. Furthermore, the success of consumer watchdogs and federal regulators in shielding investors from fraud in other financial transactions and banking has created an expectation of accountability that doesn't exist in the current patchwork of cryptocurrency oversight.

Just last month, the Treasury Department released Crypto-Assets: Implications for Consumers, Investors, and Businesses, one of three reports in a series the agency released pursuant to President Joe Biden's March executive order on the need to regulate digital assets. The report noted the increase in the overall number of crypto scams by 60 percent year over year, with the total value of stolen assets rising to $7.8 billion.

A lack of clear market standards and oversight may have helped cryptocurrencies grow in their infancy, but with criminal fraud becoming a multi-billion-dollar threat, the need for consumer protections around these assets has become even more important, both to prevent the negative effects of fraud and avoid sabotaging cryptocurrencies' potential to continue growing responsibly for the benefit of consumers and investors alike. By setting clear policies to combat scams and fraud, federal watchdogs can help the cryptocurrency ecosystem function safely while allowing companies to increase innovation in the digital asset sector moving forward.

As we move forward and consider practical protections for consumers in digital asset markets, it is vital for regulators and Congress to recognize the fundamental need to preserve consumer confidence and investor trust. After all, it was the lack of trust in our financial institutions that helped produce alternative currencies in the first place.

Congressman Raja Krishnamoorthi, a Democrat from Schaumburg, Ill., chairs the House Subcommittee on Economic and Consumer Policy.

The views expressed in this article are the writer's own.