It's the Wild West in the world of cryptocurrency. Unlike old-time bandits who carried guns, many thieves of today carry mice. Make no mistake, though, in the boomtowns on this new frontier, perils lurk. The sheriff who's on watch may be dozing off beneath a wide-brimmed hat.
Cryptocurrencies are virtual tokens that can be used to buy things. Resembling money, they attract the attention of computer-savvy thieves. Cryptocurrency exchanges are online places where people buy and sell Bitcoin, Ethereum, and scores of other types of digital coins.
Read on to learn more about cryptocurrency theft and how it can impact you.
The Problem of Cryptocurrency Theft
By some estimates, more than a billion dollars of bitcoins and other virtual currencies are stolen each year and the numbers continue to grow. This includes hacks, scams, and fraudulent "initial coin offerings."
In several well-publicized cases, hackers have burglarized cryptocurrency exchanges, in one instance reportedly walking away with more than $500 million. Why do criminals target these exchanges? Perhaps because, as 20th-century bank robber Willie Sutton supposedly responded when asked why he robbed banks, "that's where the money is."
If law enforcement authorities manage to catch them, cyber criminals can be prosecuted under existing laws for grand theft, computer crimes, and other offenses. One person accused of bitcoin theft pleaded no contest to pilfering more than $1 million by hacking into numerous individuals' cellphones.
Who's in Charge?
Who creates the rules on the cryptocurrency frontier? That's a good question. Although police will investigate and prosecutors will bring charges if wrongdoers can be identified and caught, most state and local governments have taken a hands-off approach when it comes to preventive regulation. There are noteworthy exceptions such as New York State, which imposes a licensing requirement on cryptocurrency exchanges and other digital-coin businesses.
At the federal level, watchdog agencies such as the Securities and Exchange Commission (SEC) have tentatively begun to wade into regulating some aspects of this emerging financial area, such as initial sales of new digital currencies. The feds have also issued consumer warnings about the risks cryptocurrencies pose, particularly from an investment standpoint.
Most other countries, for their part, have taken little or no regulatory action to protect their citizenry from bitcoin theft and other schemes. There are some exceptions like Japan, which strictly oversees cryptocurrency exchanges. A few nations including Morocco actually outlaw cryptocurrencies altogether. Taking the opposite approach, Lithuania and a handful of other nations embrace blockchain technology (the basis of cryptocurrencies) and have sought to develop their own systems of virtual coinage.
What About Insurance?
Can insurance play a role here? Some insurers have begun offering policies to protect against digital currency heists, and these risk-lessening products may ultimately help spur the growth of the budding cryptocurrency industry. However, some underwriters are hesitant to enter this volatile and unsettled new market without more careful study.
Have Questions About Cryptocurrency Theft? Speak with a Lawyer
If you've been victimized by a cryptocurrency swindle, reach out to a consumer protection attorney near you who has training and experience in this complex new legal terrain and who can help you fight to recover your losses. On the other hand, if you've been accused of bitcoin theft or another cyber crime, you'll need a good local criminal defense lawyer to evaluate the evidence and poke holes in the prosecution's case.