Crypto Scammers Take Advantage of New EU Regulations

Europe’s new cryptocurrency regulations have reportedly given fraudsters a new pathway to scamming consumers.

As the Financial Times (FT) reported Thursday (Aug. 6), officials are warning that scammers are capitalizing on the disruption caused by the new rules to steal funds by impersonating crypto firms and digital asset regulators.

European financial watchdogs told the news outlet they’ve seen a jump in scams targeting crypto customers since a July 1 deadline requiring crypto companies to be licensed under new European Union (EU) regulations.

Crypto firms that fail to be authorized are deemed illegal and must tell customers to pull or move their assets, which could give criminals an opening, the report added.

“This moment is an opportunity for scammers more than usual,” said Stéphane Pontoizeau, executive director of the market intermediaries and market infrastructure supervision directorate at the Autorité des Marchés Financiers, the French financial regulator.

Since the rules came into effect, hundreds of crypto firms operating under national authorizations in the EU have been forced to shutter, sell or move their activities after failing to obtain EU-wide approvals to operate under the Markets in Crypto-Assets (MiCA) Regulation.

Just 323 crypto companies have secured licenses, the FT added, citing figures from the European Securities and Markets Authority (ESMA). Data provider VASPnet estimated in July that more than 1,700 unlicensed companies would need to end their operations.

High-profile crypto exchanges like Coinbase and Kraken have gotten licenses under the new regulation, while Binance — the world’s biggest cryptocurrency platform — has not been licensed.

ESMA said it was “aware of fraudulent practices involving the misuse of ESMA’s logo and identity, including through the use of falsified documents, to promote scams.”

As the FT notes, this is happening amid an uptick in crypto scams and fraud. Losses from these crimes climbed to $17 billion globally last year, compared to $6 billion five years earlier, the report added, citing Chainalysis data. Impersonation fraud has been one of the fastest-growing varieties of crypto scams, the company has said.

Writing about MiCA earlier this summer, PYMNTS contended that the goal of the regulation was straightforward, to “provide clarity, encourage innovation and establish guardrails that could help digital assets evolve into a mature financial sector.”

A PYMNTS Intelligence and Citi report, “Chain Reaction: Regulatory Clarity as the Catalyst for Blockchain Adoption,” found that blockchain’s next leap will be guided by regulation, and that “MiCA initially gave Europe a significant first-mover advantage over other major markets.”