Crypto scams – what are your legal defense and guide to avoid being scammed?

The concept of Cryptocurrency or digital currency has taken the world by storm. The most popular versions being the ‘Bitcoin’ and ‘Ethereum’. Even the people who do not understand the crypto fad are well-versed in ‘Bitcoin’ and its decade long bull run in valuation. The rise of ‘Bitcoin’ has been so significant that the term has become synonymous with the term ‘Crypto’.

A cryptocurrency can be understood as a digital currency that can be used to buy goods and services functioning on blockchain technology and online ledger record. The most attractive benefits that crypto’s offer is its decentralization, avoidance of banking fees, speedy transactions, and high level of confidentiality in comparison to the traditional transaction model. Blockchain technology how now progressed even further to add in smart contract functionalities that are proposed to be revolutionary at best.

Despite the allure that cryptocurrencies offer, there are some core legal issues that should be well understood to ensure that you are not lured into a scam.

Cryptos are not regulated security:

Cryptocurrencies by their very nature, aim to remain decentralized and hence they do not constitute a conventional currency that is issued by a monetary authority with firm checks and balances incorporated. Cryptocurrency is instead supplied as a crypto stock on various exchanges, and they do not constitute ‘listed securities’. They are intended to provide many of the same functions as long-established currencies such as the U.S. dollar, Euro or Japanese yen; however, they are not backed or insured by any monetary authority or government. Although, it is seen that some countries are now slowly moving towards this, with Republic of El Salvador becoming the first country to legalize crypto.

Due diligence is the key:

Making maximum use of the unregulated crypto market, fraudsters are at work to lure people into investing in bogus cryptos. Recently there was big hype on buying in on ‘Dubai Crypto Currency’ which turned out to be a scam. The Dubai  government took action and issued a statement to warn the public to be vary of the false information being circulated. Further, the UAE central bank has reaffirmed that it neither accepts nor acknowledges any cryptocurrency in the UAE and that the only recognized legal tender remains to be the UAE Dirham.

When investing in cryptocurrency, choose only the exchange platforms that are regulated in your jurisdiction. Enquire about their license and check for regulatory approval from the Dubai Financial Services Regulatory Authority (DFSA) or Abu Dhabi Global Market (ADGM). Also, read and understand about any ‘voluntary liquidation’ clauses that such exchanges might have. Further, enquire about their security features, including cold storage and about your options to store your purchased cryptos in Crypto hardware wallets.

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