SALT LAKE CITY — We are living in the digital age, and it seems like there isn’t anything you can’t find online — and that includes money in varying forms. One type of currency picking up steam is cryptocurrency.
In this edition of Consumer Rules with Robyn, the Division of Consumer Protection wants you to know what cryptocurrency is and what to think about before you invest.
Crypto is a form of digital money that operates without a central bank or government, its encryption is what makes it secure. Transactions are recorded on a public ledger called a blockchain.
The difference between it and traditional forms of currency? For starters, because it’s not government-backed, it’s not government-insured, which means your funds may not be recoverable if something goes wrong. Unlike credit or debit cards, there are no legal protections for payments.
Payments are irreversible; usually, it’s only reversible if the recipient sends it back.
Also, its value is volatile, which can be good or bad.
“The pro right now is because it’s so volatile, meaning it kind of goes crazy from day-to-day, you can catch those highs, which can bring about a lot of profit if you can time it right,” said Robert Cummings, director for the Utah Division of Securities.
But he adds that timing those highs can be risky.
What’s more, the complex nature of crypto can make it difficult for the novice user to navigate.
“There are a multitude of cryptocurrency out there. You don’t know who it’s created by, you don’t know even whether it exists on the blockchain unless you have that type of background,” said Cummings. “Like I said, it is volatile, so cryptocurrency generally is only worth what the next person is willing to pay for it, because if there is no next person, there could be a cascading down of all that value and a loss of a lot of money.”
As with anything that gains popularity, there’s potential for scammers to strike.
“If you’re talking to someone or you don’t know them and they’re talking investments and they tell you to go to Discord, WhatsApp, Snapchat, no good investment advice is provided over those applications,” said Cummings. “If you’re being pitched an investment that could be worth 20%, 25% returns over time, you’ve got to ask yourself, ‘Why are they telling me about that?’ If it was really that good, they’re going to be dumping all their money into it and not telling anybody else.”
Some common cryptocurrency scams to watch for:
- Demand for crypto payment: No legitimate enterprise will request payment in crypto.
- The promise of guaranteed profits or big returns: Anyone promising quick, easy money with zero risk.
- Fake job offers: Scammers can post phony job ads asking for upfront crypto fees; legitimate businesses won’t make you pay for a job.
- Romance scams: Allowing scammers to build trust before pressuring victims to invest in fake crypto platforms.
- Giveaway scams: Scammers will impersonate celebrities, promising to multiply crypto sent to them.
Remember to always do your research.
Before you invest, search the company or person with terms like “review,” “scam” or “complaint.”
To report fraud or suspicious activity, follow these links to the Federal Trade Commission and the Utah Division of Securities websites.