Fraud cases in California underscore the need for regulatory action for cryptocurrencies

The California Department of Financial Protection and Innovation (DFPI)for its acronym in English) announced last month that it had issued cease and desist orders against 11 companies for violating California securities laws. Highlights included allegations that they had offered unrated securities and material misstatements and omissions to investors.

These violations should remind us Although cryptocurrencies are a unique and exciting industry for the general public, it’s still an area full of potential bad players and scammers.Yes, so far government regulation of cryptocurrencies has been minimal at best, with a distinct lack of action. Whether you’re a full-time professional investor or a casual hobbyist looking to get involved, You must be absolutely sure what you are getting into before committing to any cryptocurrency related opportunity.

California played with that Establishment of a cryptocurrency-specific business registration process for those wishing to do business in the state. Governor Gavin Newsom vetoed the proposed framework because the resources required to establish and enforce such a framework would be prohibitive for the state. While this type of compliance infrastructure has not yet been deployed, it does indicate concerns regulators have regarding the cryptocurrency industry.

Fraud cases in California underscore the need for regulatory action for cryptocurrenciesFraud cases in California underscore the need for regulatory action for cryptocurrencies

There seems to be a pattern that new industries, particularly those that are attracting as much international attention as cryptocurrencies, are particularly vulnerable to fraud.. You only have to return to cannabis legalization to find out when the last time California dealt with fraudulent schemes of this magnitude.

It seems inevitable that California, known for being the first country in regulation and compliance, will create some sort of regulatory infrastructure specifically for cryptocurrencies in the name of consumer protection.. If history is any indication, other states will follow once California releases its framework.

Federal and state representatives have so far tried in vain to draft laws for the financial regulation of cryptocurrencies.. At the federal level, Senators Cory Booker, John Thune, Debbie Stabenow, and John Boozman have co-sponsored a bill to authorize the Commodity Futures Trading Commission (CFTC) to act as a cryptocurrency regulator, while Senators Kirsten Gillibrand and Cynthia Lummis are co-uniting Sponsored bill to create clearer guidelines for digital assets and virtual currencies. Lawmakers have even turned to tech figures like Mark Zuckerberg to crack down on cryptocurrency fraud..

Cryptocurrencies, California, CFTC, legislation, law, scam, scam, bitcoin scamSource: chain analysis

None of these or similar crypto-focused bills are expected to pass in 2022, however This level of bipartisan collaboration is unprecedented in recent times. The collaboration should reflect the sheer scale of the need for a regulatory framework. In other words, Democrats and Republicans talking about anything should stop the press, but the fact that they’re co-sponsoring multiple bills should tell us there’s a tremendous need for guidance.

How should investing in the cryptocurrency space be approached if the government doesn’t put controls in place? There are some general points to consider when considering a cryptocurrency investment opportunity..

When reviewing an opportunity, do your due diligence! Don’t take anyone’s word without some level of substantive support. If crypto isn’t an area of ​​expertise for you, reach out to professionals who have qualified experience. Make sure to use cryptocurrency monitoring and blockchain analysis tools as part of the investigative process whenever possible.

A common strategy used by scammers is to apply undue pressure or artificial deadlines for a potential close.. Slow down the process and take advantage of the time it takes you to make an investment decision.

If it sounds too good to be true, it probably is.. Despite the exaggeration of the cliche, it’s a valid point. There have been instances of programs that offered initial and ongoing dividend payments to new investors and additional dividend payments to investors brought in by those new investors. If that sounds like a pyramid or a multi-level marketing scheme, that’s because it is. Terms such as “risk-free investment” are also used. Finally, If no one knows where the opportunity is coming from, beware.

Although cryptocurrencies can be a fun and exciting topic with many legitimate opportunities, There are bad players who take advantage of the lack of government oversight and the excitement of overzealous or uneducated investors.

Zach Gordon is a Certified Public Accountant (CPA) and Vice President of Crypto Accounting for Propeller Industries, serving as a fractional CFO and advisor to a portfolio of cryptocurrency and Web3 clients. He was named a CPA of the Forty Under 40, sits on the NYSSCPA Committee on Digital Assets and has worked with crypto clients in various capacities since 2016.

This article is provided for general informational purposes and is not intended and should not be construed as investment or legal advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.