Bitcoin SuperSplit: ‘Wild West’ trading sites and crypto casinos raise scam fears
Unregulated platforms claim to be able to quadruple your money in a day
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Your support makes all the difference.More than a decade after its inception, bitcoin and the broader cryptocurency industry are still widely referred to as being in the “Wild West” phase of their development.
As recently as last month, US Senator Elizabeth Warren used this cliché to describe crypto trading, following a meeting of the Senate Banking Committee to discuss digital currencies.
While there are a number of well-established exchanges that allow customers to securely trade fiat currencies for cryptocurrencies – Coinbase even became a publicly traded company earlier this year – a new breed of platforms are emerging that some experts warn could carry immense risk.
>> Follow all the latest updates with The Independent’s live coverage of the crypto market
Bitcoin SuperSplit and Immediate Bitcoin are among this latest trend of sites promising huge returns through something known as bitcoin Contracts For Difference (CFDs). They claim to be AI-driven systems that use algorithms to guess the direction of the market.
A single $250 deposit could generate up to $750 in just one day, according to a boast on Immediate Bitcoin’s site, though a lack of oversight from regulators mean little is being done to protect users. The pace of the advancement of technology mean regulation is typically several steps behind, with CFDs able to operate in over 160 countries around the world.
One of the few places where they are banned is the US, where cryptocurrency experts have called on authorities to establish crypto-specific regulation in order to curb market abuses.
“Crypto is characterised as the Wild West of financial markets at the moment – even though US regulators have been trying to rein in the sector their attempts have been underwhelming,” said Carol Alexander, Professor of Finance at the University of Sussex.
“To be truly effective, there needs to be regulation for all crypto players so there is no room for uncertainty about who will bring an action and how they will tackle the worst market abuses. If US regulators don’t take this step to show that they are serious about specific oversight of the sector then they may open themselves to the risk of class action lawsuits from investors arguing that they have taken insufficient steps to limit the risk of loss from malpractice.”
Other emerging trends include crypto casinos, which allow users to gamble bitcoin, Ethereum (ether) and other cryptocurrencies in relative anonymity.
Even classic video game firm Atari has been drawn in by the potential of lucrative profits, announcing a crypto casino earlier this year. Set in a virtual world called Vegas City, Atari is expecting up to $400 million in bets to be made over the next two years, as players gamble on “nostalgia-inducing games” like Pac-Man and Space Invaders.
While Atari’s efforts appear sincere, experts say other copycat ventures could undermine the entire industry unless a robust regulatory framework is introduced that sifts out scam sites without stifling innovation in the space.
“I think the US needs to take the global lead on this issue, they’re the only regulators who have shown any stomach for the fight. The UK has merely tinkered around the edges with some changes in tax rules but it has shown very little interest largely because it doesn’t have the same exposure to crypto from corporate investors and retail banks,” said Professor Alexander.
“Neither the UK nor European regulators have really started to get to grips with crypto regulation... So really the responsibility falls upon the US to get this right and show the way for others to follow.”
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If you are interested in trading, eToro* and Coinbase are two of the biggest exchanges operating in the UK and a good place to start.
Cryptocurrencies are a highly volatile unregulated investment product and investing in them could lead to a loss of capital. *No FSCS or Financial Ombudsman investor protection. 67% of retail investor accounts lose money when trading CFDs. *You should consider whether you understand how CFD’s work, and whether you can afford to take the high risk of losing your money.
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