Wild West trading sites and crypto casinos raise fears of scams

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Bitcoin trading, investing and gaming platforms have proven to be controversial among regulators (Getty Images / iStockphoto)

More than a decade after its inception, bitcoin and the broader cryptocurrency industry is still widely considered to be in the stage of development of the Wild West.

As recently as last month, U.S. Senator Elizabeth Warren used this cliché to describe crypto trading, following a Senate Banking Committee meeting to discuss digital currencies.

While there are a number of well-established exchanges that allow customers to securely exchange fiat currencies for cryptocurrencies, Coinbase even became a publicly traded company earlier this year, a new generation of platforms are emerging which some experts believe could carry immense risk.

>> Follow all the latest updates with live coverage of the crypto market by The Independents

Bitcoin SuperSplit and Immediate Bitcoin are part of this latest trend of sites promising huge returns through so-called bitcoin contracts for difference (CFDs). They claim to be AI-driven systems that use algorithms to guess the direction of the market.

A single deposit of $ 250 could generate as much as $ 750 in a single day, according to a boast on the Immediate Bitcoins site, although a lack of oversight by regulators means little is being done to protect users. . The pace of advancement in technology means that regulation is typically several steps behind schedule, with CFDs capable of operating in more than 160 countries around the world.

One of the few places where they are banned is the United States, where cryptocurrency experts have called on authorities to establish crypto-specific regulations to combat market abuse.

Crypto is currently considered the Wild West of financial markets, even though US regulators have tried to curb the industry their attempts have been disappointing, said Carol Alexander, professor of finance at the University of Sussex.

To be truly effective, there has to be regulation for all crypto players so that there is no uncertainty as to who will take action and how they will tackle the worst market abuse. If US regulators do not take this step to show that they are serious about specific industry oversight, then they may expose themselves to the risk of class action lawsuits from investors claiming they have taken action. insufficient to limit the risk of loss due to malpractice.

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Other emerging trends include crypto-casinos, which allow users to play bitcoin, Ethereum (ether), and other cryptocurrencies in relative anonymity.

Even classic video game company Atari was drawn to the potential for lucrative profits, announcing a crypto casino earlier this year. Set in a virtual world called Vegas City, Atari expects up to $ 400 million in bets to be made over the next two years, as players bet on nostalgic games like Pac-Man and Space Invaders. .

Video game company Atari is considering cryptocurrency casino (Getty Images)

While Ataris’ efforts seem sincere, experts say other copy companies could undermine the entire industry unless a strong regulatory framework is introduced to weed out scam sites without stifling innovation. in the space.

I think the United States must take the global initiative on this issue, it is the only regulators who have shown the courage to fight. The UK has simply tinkered around the edges with a few changes to the tax rules, but has shown very little interest largely because it doesn’t have the same crypto exposure from private investors. and retail banks, said Professor Alexander.

Neither the UK nor EU regulators have really started to tackle the regulation of crypto … so it really falls to the US to get it right and show the way for others to take. .

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