Crypto scam alarms ring

Crypto scam alarms ring

The widespread impact of cryptocurrency investment scams that have hit the headlines in recent weeks highlights the need for improved financial literacy among investors, especially the young, as well as tougher regulations to prevent these financial crimes.

After a number of incidents like the high-profile Luna crash, which saw a 99.9% drop in the price of the currency, public confidence in these digitally mined cryptocurrencies has plummeted. In Thailand quite a few scams have emerged involving famous people, with accumulated losses surpassing billions of baht, triggering alarm bells about this kind of business.

Moreover, a large share of the victims are young. Some are students who are not yet able to earn their own income, but rather chose to gamble with their parents or grandparents' money or savings which were intended for their education. They fall for these scams as a result of the prevailing "get-rich-quick" attitude, ignoring the risks accompanying these investments, some of which are run like a chit fund similar to the infamous Mae Chamoy shares that exploited the tactics of speculators.

Reports from the National Economic and Social Development Council (NESDC) show that more than half of cryptocurrency investors are under 30 years of age. About 47% are aged 21-30 while 3% are teenagers or younger. According to a study by Mahidol University study, the so-called Gen Z group finds digital currencies to be the most attractive as they want a short-term investment with high returns.

Drawn by aggressive marketing tactics, like the use of influencers or top entertainers, and tricked by the false claims of high returns, many young people have been tempted to invest.

Additionally, the NESDC found that only 25.45% of crypto investors have thoroughly studied the conditions and risks associated with digital currency, while 20% admitted they had little knowledge about this kind of investment, and 6.5% had no knowledge.

Another related report by Mahidol University found that 45% of those in the crypto market do not have enough knowledge, and are at risk of making mistakes.

Many investors, despite having little or zero knowledge of this, were made to feel they would have missed out had they not grabbed the opportunity to prosper in the digital market.

Interestingly, a survey by the Securities and Exchange Commission found that more than 40% of crypto investors used statistics and graphs to analyse their trades, compared to 26% who rely on news reports and media analysis while 25% merely followed their instinct.

A psychoanalytical report by a private firm likened this to online gambling, and this group of investors were probably overly confident about their ability and tactics to make gains.

Somchai Jitsuchon, from the Thailand Development and Research Institute, urged authorities to come up with measures to deal with the situation as a number of high school students have turned to loan sharks and suffered cryptocurrency losses.

As the authorities hunt down the swindlers, there must be efforts to better regulate digital platforms, such as ensuring everyone observes "know your customer" (KYC) procedures, which help verify investors' identities and can protect young people from being lured into trading in areas they know nothing about.

They must be made to understand that it's too dangerous to enter into the digital market without a certain level of financial literacy.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

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