Scammers like to demand electronic forms of payment. Most common requests are for cryptocurrency, E-Transfers, wire transfers, and in some cases gift cards. These forms of payment are usually used because they require no in-person interaction and can be accessed from around the world. These transfer methods make it difficult, but not impossible, for police to trace back to the suspect.

Cryptocurrency is a complex asset, but its popularity continues to grow, both legally and illegally. We want to provide a brief explanation about the most common cryptocurrency, Bitcoin, to help citizens understand why they should be skeptical if someone, especially someone claiming to be from a government, authority, or financial institution, is allegedly asking you to pay them with it.

It’s important for citizens to know that there are approximately 17,000 virtual assets (cryptocurrencies) that are actively traded or listed. The most popular cryptocurrencies used in public and by fraudsters are Bitcoin (BTC), Ethereum(ETH), Tether (USDT), and USD Coin (USDC).

What is Bitcoin?

Although the topic of digital currency is not new, Bitcoin is the origin of what we know cryptocurrencies to be today. It was created because of the 2007/08 financial crisis. The name Bitcoin can be misleading. It’s not an actual physical coin or currency like the Canadian Dollar (it is not centrally controlled by any entity). Instead, it is digital and has two main functions. Bitcoin is a method of payment (buy/sell) and a store of value (Investing).

Bitcoin’s worth constantly changes, as the supply and demand for the cryptocurrency changes. Over time, the price of Bitcoin has gone up, but it also could plummet at any time if support for Bitcoin decreases or stops completely.

Bitcoin is not entirely anonymous. Every transaction is stored on a ledger called a blockchain and can be viewed by everyone using a publicly available blockchain explorer. However, all parties involved in the transaction do not have their names attached to the transaction, thereby promoting pseudo-anonymity making it attractive to criminals.

Why do people use it?

• Fees are exceptionally low compared to traditional banking fees.
• There is no third-party (bank/organization) with control over your funds
• It is a person-to-person transaction
• Some believe it cannot be traced and is anonymous (tracing is possible, people are more pseudo-anonymous). 
• Because Bitcoin can be viewed as a store of value and can fluctuate rapidly, people see Bitcoin as an investment. It is highly risky, meaning the reward could be high or you could lose everything.

Why is it used in scams?

Although it is reported that most bitcoin transactions (98.9%) are not associated to criminal activity, the birth of cryptocurrency has provided individuals with new mediums to facilitate criminal activity. As a digital currency, Bitcoin transactions and wallet addresses can be traced; however, the attached identity to the wallet address is not known. This is a perfect way for a scammer to receive a lot of money, in cryptocurrency, with the idea of remaining anonymous. When criminals want to change their cryptocurrency to fiat currency (Canadian currency) they must use an exchange (place to buy/sell crypto), and when this happens law enforcement may have an opportunity to identify the criminal.  

Bitcoin involves no face-to-face contact with a bank teller or cashier; instead, money is placed into a machine like an ATM or funds are transferred online. Scammers are constantly trying to limit a complainant’s interactions with others to avoid the chance of someone warning the person that they are falling victim to a scam.  

Top scams with Bitcoin/cryptocurrency as the means of payment include: 
• Government impersonation
• Employment
• Romance 
• Fraudulent Sale or Purchase
• Business Impersonation
• Family Emergency
• Investment – Most lucrative scam
• Rental Property
• Extortion/Ransomware

Can you catch the scammer and get my money back?

With cryptocurrency, we can track where the money goes, but we can’t stop or reverse the transaction of cryptocurrency (unlike some banking where the bank can put a hold on the transfer), so unfortunately it is quite rare for your funds to be returned.

The identity of the owner of the scammer’s cryptocurrency account is not easy to identify either, however, we have been successful in many cases. The difficult part is that these scammers are generally located outside of Canada and thus we must engage with external agencies to assist in an investigation.

Should you be suspicious if someone asks for payment in Bitcoin?

Bitcoin is not a commonly recognized currency, and most citizens don’t understand it, so why would someone ask for payment in it? No government, authority, financial institution, or reputable business will ask you to send Bitcoin. If you don’t understand it, you shouldn’t be paying with it!

We encourage citizens to learn more about cryptocurrency investment scams here.