The latest scam to hit the digital industry occurred in Hong Kong where a Bitcoin exchange MyCoin, has apparently stunned 43 investors by duping them of $8.12 million. The earlier reported losses of $387 million got estimated around the exchange’s own estimate of the business value. Now, fears are rising that the system was a ‘ponzi’ scheme, wherein investors got asked to bring in more investors in exchange of luxurious awards such as Mercedes-Benz cars or Cash.
The Acceptance of Bitcoin by Microsoft, Expedia and Dell
Even as the Bitcoin ecosystem continues to grow with major brands such as Microsoft, Expedia and Dell accepting it as a mode of payment, the digital currency has failed to make a favorable impression as a currency. Always pegged as a safe, secure and reliable mode of transaction, Bitcoin has failed utterly to protect its reputation from successive cyber attacks and monetary frauds and scams.
Online Scams, Cyber-Attacks and Bitcoin Hacking Scandals
In early 2014, the world’s biggest Bitcoin exchange, Mt. Gox pulled down the shutters with about $450 million worth of Bitcoins missing.
In the first week of January 2015, hackers struck at the UK-based stamp exchange and disappeared with Bitcoins amounting to $5 million.
Even as the Hong Kong Commercial Crime Bureau (CCB) initiates a preliminary investigation into the MyCoin scam, the lawmakers are demanding a complete ban on the digital currency. The Hong Kong Monetary Authority (HKMA) reiterated its advice to the public “to exercise extra caution while making an investment in the highly speculative currency”.
Investors now seem more worried about losing their investments due to frauds or attacks and not the depreciation in the market prices.
The Regulation of Bitcoin (BTC) and Other CryptoCurrencies
Without a proper regulatory framework and acknowledging the current framework of the Bitcoin network to safeguard itself from the increasing hacking attacks and financial frauds, the crypto currency which was earlier assumed as a safe substitute to the failing fiat currencies, may lose value.
Written by: Nikhil Gupta (Financial Markets Analyst/Writer)