According to WhatIs, a tech target’s free encyclopaedia and learning centre for IT and business professionals, digital currency is a type of currency that exists electronically in a digital wallet. Owners can convert this digital currency into traditional cash by transferring it to a bank account.
Cryptocurrency, like bitcoin, operates on blockchain technology for verification. Unlike traditional currency, cryptocurrencies do not rely on a central authority like a bank. This decentralised nature makes it more challenging to recover in cases of theft.
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Derrick Ahishakiye, a 26-year-old cryptocurrency investor, fell victim to a scam promising financial freedom when he ventured into crypto trading.
"I was approached by individuals who guaranteed financial freedom, showing me success stories and promising higher profits with minimal risk. They pressured me to invest quickly, fearing I would miss out on the opportunity,” Ahishakiye recounted.
Despite the lack of transparency and vague explanations about the investment, Ahishakiye entrusted Rwf 400,000 to them due to his limited knowledge of how cryptocurrency investments function.
Clement Uwajeneza, a blockchain technology entrepreneur and crypto-economy enthusiast in Rwanda, sheds light on how cryptocurrency scammers lure people with false promises. He advises investors to exercise caution and make informed decisions when choosing where to invest their money.
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"One of the main tactics used in cryptocurrency scams is the sugar-coated stories of investing $100 and making a $1,000 profit within a few days, conveniently omitting the potential for losses,” he explained.
"People are often enticed by the success stories of individuals in the digital market, which creates a strong allure for quick and easy money. Unfortunately, this perception leads many into falling victim to scams,” he added.
Common cryptocurrency scams to watch
According to Norton, a leading antivirus and security software, cryptocurrency scams are becoming increasingly prevalent and diverse this year, with various tactics used by fraudsters to deceive individuals.
Impersonation is a widespread tactic where scammers mimic respected individuals or entities to trick potential victims. For instance, they create fake profiles on social media, posing as influential figures in the crypto industry to endorse fraudulent investment schemes.
Another method involves phishing emails or fake websites that impersonate legitimate crypto platforms. These scams aim to deceive users into disclosing sensitive information or transferring funds to fraudulent accounts.
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Blackmail is another tactic employed by scammers, where victims are threatened with exposure of sensitive information unless they pay a ransom in cryptocurrency. For example, scammers may claim to possess incriminating evidence or personal data and demand payment to prevent its release.
In more aggressive cases, blackmailers may threaten to launch distributed denial-of-service (DDoS) attacks on crypto exchanges unless a ransom is paid. These coercive tactics exploit fear and vulnerability to extort cryptocurrency from victims.
Ultimately, all these scams target obtaining personal information to access victims' digital wallets and steal funds stored in their accounts. It underscores the importance of robust cybersecurity measures and awareness to protect against such fraudulent schemes.
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Investing with caution
Beware of fake cryptocurrency exchanges that entice investors with promises of great returns and additional bitcoin. Unfortunately, these exchanges turn out to be fraudulent, and investors only realise this after losing their deposits.
Stick to well-known crypto exchange markets like Coinbase, Crypto.com, Binance, among others to steer clear of unfamiliar exchanges. Conduct research and check industry sites for information on the exchange's reputation and legitimacy before providing any personal information.
AI scams are another concern in the cryptocurrency market due to the rise of artificial intelligence. Attackers use AI chatbots to engage users, offering advice and promoting fake tokens that lead to pump-and-dump schemes—artificially inflating token values before selling them off.
AI can also manipulate proof of work, creating an illusion of widespread support for a cryptocurrency project to make it appear legitimate. This inflation of followers complicates research into a token's authenticity.
Uwajeneza emphasises the importance of protecting oneself from scammers: "Invest wisely and take the time to understand the market. Cryptocurrency success requires patience, diligence, and a willingness to learn—it’s not a get-rich-quick scheme.”
Although the use of cryptocurrencies is not illegal in Rwanda, the local financial system does not currently provide mechanisms to facilitate cryptocurrency trading.
Central Bank Governor John Rwangombwa has consistently maintained their stance advising Rwandans to refrain from decentralised cryptocurrencies, emphasising that they are not accepted in the financial system and lack supervision by any regulatory entity.
Governor Rwangombwa clarified that individuals are not prohibited from buying and selling cryptocurrencies externally in other jurisdictions.