According to the Central Bank of Russia’s recent report, the majority of financial scams in the country are now connected to cryptocurrencies. This has resulted in a 15.5% increase in the number of entities flagged for illegal activities, totaling 5,735 in 2023.
The rise of financial pyramid schemes, where early investors are paid with funds from new investors, is a particular concern. These schemes are increasingly using cryptocurrencies as a means of payment. The Central Bank stated, “In 2023, almost all pyramid schemes and illegal brokers offered investments in internal tokens or accepted contributions in cryptocurrency.”
One of the main reasons for this trend is the appeal of cryptocurrencies, which offer anonymity and borderless transactions. The Central Bank identified 2,944 cases of crypto-related pyramid schemes, a 150% increase from the previous year.
The report also highlights the rise of “pseudo-brokers,” entities that falsely present themselves as professional securities market participants. These illegal foreign exchange dealers heavily rely on cryptocurrencies to conceal their activities. Social media has also become a popular tool for recruiting victims, and the lifespan of scams is decreasing. However, this means that there is an increasing number of scams with a lower impact.
The Central Bank of Russia has taken action against these scams. They have implemented monitoring systems to detect illegal actors and work closely with law enforcement, internet regulators, and the financial sector. The bank has also blocked over 1,500 scam websites and educated citizens about the warning signs of financial fraud.
Law enforcement has been actively pursuing these scams, with 125 criminal cases and 620 administrative cases opened in 2023. This comes as Russia’s stance on cryptocurrencies fluctuates between crackdowns on scams and utilizing the technology for political purposes, such as circumventing U.S. sanctions. The decentralized nature of cryptocurrencies presents both opportunities and risks, serving as a shield against government sanctions while also being used as a tool for deception against citizens.
Overall, the Central Bank’s efforts show a commitment to combatting financial scams in Russia, but the ever-evolving landscape of cryptocurrencies poses a challenge for regulators. Edited by Ryan Ozawa.