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Crypto scam: the use of stablecoins, and ATMs



Were stablecoins designed to provide users with greater liquidity around the world and reduce the volatility of cryptocurrencies, or to enable criminals to steal users’ funds? Chainalysis just released a report that provides insight into this question. 

For the past two years, there has been a spike in the use of stablecoins by scammers in the crypto industry according to Chainalysis. Before 2021, most scamming activities were done using bitcoin.

But with the change of market realities, from mid 2021 onwards, scammers are using stablecoins to receive payments from their victims.

This trend seems strange as these scammers rely on stablecoins even when bitcoin was bullish. A possible reason behind the affinity for stablecoins during the upward trend of bitcoin was most likely to avoid any market crash.

Thus, stablecoins present a better hedge against any loss of value for these criminals. On the side of victims, the report notes that they also want to hold their bitcoin in any event of increase in value.

How ATM aids investment scams

Reports show that in 2022, $35.3 million was sent to scammers by users via crypto ATMs. This is more than 50% of all funds sent to illegal addresses via an ATM. According to Chainalysis, the naivety of crypto newbies and lack of technological experience is a factor that has driven the numbers of scams done via an ATM. 

Since these users are familiar with ATMs for fiat transactions, they are not aware of the dangers of the same activity when it comes to cryptocurrencies. 

To solve this problem, Chainalysis explained that organizations that do businesses related to crypto ATMs can “better serve their customers and significantly reduce their exposure to illicit activity by educating customers on scams” and use warning prompts to guide their users before they initiate such transactions.

Scams are geographically sensitive

The report showed that different scams are designed to reach out to different people in different places. The commonality in language and culture play a huge role in making certain kinds of criminal activities flourishing in one region and unfit in another.

An example was an NFT scam that was popular in North America with a focus on “onboarding new cryptocurrency users”. NFTs are more popular in that region and so it has driven more NFT-based scams in the industry.

Another example mentioned are investment scams which are seen more in places like Australia and South America. And a large majority of these illicit activities are done through centralized exchanges. “The vast majority of victim payments to scams come from centralized exchanges,” Chainalysis said.

Read also;

How victims of ransomware are winning against crypto crime

Why romance scam thrives in bull & bear markets

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