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House committee inquires into 5 crypto companies amid rise in fraud

The rise in crypto scams over the past year has drawn the attention of a House committee, which is now launching inquiries into Coinbase, Binance.US, FTX, Kraken, and KuCoin.

Video transcript

RACHELLE AKUFFO: Congress is readying to crack down on crypto fraud. A House oversight subcommittee today is sending letters to four government agencies and five digital asset exchanges requesting information for how they're protecting consumers from scams and fraud. In a letter written to Coinbase, the chairman of the Subcommittee on Economic and Consumer Policy Raja Krishnamoorthi writes, "As stories of skyrocketing prices and overnight riches have attracted both professional and amateur investors to cryptocurrencies, scammers have cashed in. The lack of a central authority to flag suspicious transactions in many situations, the irreversibility of the transactions and the limited understanding many consumers and investors have of the underlying technology make cryptocurrency a preferred transaction method for scammers."

Well, our David Hollerith is here with more on that. So, David, what can you tell us?

DAVID HOLLERITH: The goal of the letters is to help Congress understand what regulators and players in the private sector are doing to protect consumers with regard to cryptocurrencies against the act of fraud or scam projects. Citing a report from the Federal Trade Commission, Representative Raja Krishnamoorthi, the subcommittee's chairman, pointed out that the annual amount of cryptocurrency lost to fraudsters is on track to surpass a billion dollars this year.

And as we previously reported, private sector firms such as Chainalysis have placed the amount of crypto lost in scams between January and July of this year much higher, at $1.6 billion, at this point. So it's worth noting that the letters highlight how the private sector has taken steps to, more or less, try to quell or prevent investors in investing in scams. And some of those look like code audits on projects done by third parties.

This is particularly useful in the decentralized finance area of crypto. Some other businesses also hold insurance policies, specifically in case of the loss of cryptocurrencies or of customer funds due to crime. But as the subcommittee's chairman stated in the letters, this kind of looks like a patchwork of resources that consumers have access to.

And really, what he's asking for is a standardization of some sort for members of the investing public.

RACHELLE AKUFFO: And we've certainly seen the government trying to crack down on some of this, with the Biden administration obviously wanting more oversight here as well. A big thank you to our very own Dave Hollerith.