Australian investors lost over $2.1 million to cryptocurrency scams in 2017, a report by country's Competition and Consumer Commission says.
The Commission in its annual report said that the scale of scams grew in tandem with the price of cryptocurrencies.
“The use of cryptocurrencies as a payment method in scams and scams capitalising on the popularity of investments in cryptocurrencies peaked in the last quarter of 2017. Approximately $2.1 million in losses where cryptocurrencies were a factor in the scam were reported to Scamwatch in 2017,” it said.
Between January and September 2017, about $100,000 was reported lost per month to scams which had a cryptocurrency angle. However, in the month of December 2017, reported losses to Scamwatch exceeded $700 000 and the average reported loss had jumped from $1,885 in January to $13,205.
The Commission said that the quantum of scams was likely the “very tip of the iceberg.”
The methods employed by the scammers in Australia was not different from ones employed in other countries. Fake initial coin offerings, pyramid schemes and ransomware were some of the examples of the scams resulting in loss of money.
Out of the $340 million lost to scams, one-fifth was lost to investment scams specifically in Australia last year, the report said.
In an analysis by the Wall Street Journal, out of 1,450 coin offerings, it found 271 ICOs with red flags which included “plagiarised investor documents, promises of guaranteed returns and missing or fake executive teams.”
Australia has had a mixed attitude towards cryptocurrencies. The Australian Taxation Office stated in a guidance in December 2017:
'One example of cryptocurrency is Bitcoin. Our view is that Bitcoin is neither money nor Australian or foreign currency. Rather, it is property and is an asset for capital gains tax (CGT) purposes. Other cryptocurrencies that have the same characteristics as Bitcoin will also be assets for CGT purposes and will be treated similarly for tax purposes.'
Whereas on the other hand, Australian senators from both major parties (Labor and Coalition) stepped forward to call on the Reserve Bank of Australia (RBA) to accept cryptocurrencies as an official form of currency in August 2017.
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