Crypto scam victims have lost more than $1bn since 2021

Report coincides with New York state passing legislation to limit harmful environmental effects of cryptomining

Bitcoin mining machines use huge amounts of energy. Bloomberg
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More than 46,000 people reported losing more than $1 billion in cryptocurrency frauds since the start of 2021, the US Federal Trade Commission said in a report on Friday.

Nearly half the people who reported losing digital currencies in a fraud scheme said it started with an advertisement, a post or a message on a social media platform, the commission said.

The craze for cryptocurrencies hit a fever pitch last year, with Bitcoin hitting a high of $69,000 in November.

Reports point to social media and crypto as a combustible combination for fraud, the agency said and added that about $575 million of all losses related to digital currency frauds were about “bogus investment opportunities”.

Nearly four out of every $10 lost in a fraud originating on social media was lost in crypto — far more than any other payment method, with Instagram, Facebook, WhatsApp and Telegram being the top social media platforms in such cases, the report said.

The average reported loss for an individual was $2,600, and Bitcoin, Tether and Ether were the top cryptocurrencies that people used to pay scammers, the commission said.

Coinciding with the report, a milestone environmental measure designed to tap the brakes on the spread of fossil-fuel burning cryptocurrency mining operations was passed by the New York state legislature.

The closely watched bill imposes a two-year moratorium on new and renewed air permits for fossil fuel power plants used for energy-intensive “proof-of-work” cryptomining. Proof-of-work is the blockchain-based algorithm used by Bitcoin and some other cryptocurrencies.

Environment versus economy

The bill, which supporters and opponents say is the first of its kind, now goes to Democratic Governor Kathy Hochul for consideration. The governor has said she wants to make sure any legislation balances economic and environmental concerns.

Environmentalists who lobbied for the bill said natural gas-burning power plants being used for cryptomining operations threaten the state’s ability to meet is long-term climate goals.

“Governor Hochul signing this legislation sends a signal that New York state is serious about meeting its climate mandates,” said Liz Moran of Earthjustice.

“It shows us that we cannot be re-powering fossil fuel power plants for the purposes of private gain in New York, especially as we’re looking to move away from fossil fuels entirely.”

Ms Moran said there are potentially dozens of fossil fuel plants in New York that could be converted into mining operations.

Supporters of the cryptocurrency industry said the measure would crimp economic development in New York while other states court the booming field.

The Blockchain Association, an industry group, said enacting the measure would send “a clear signal that the crypto industry is unwelcome in the state”.

“Now is not the time to cede New York’s position as the financial capital of the world,” executive director Kristin Smith said in a statement on Friday.

The Blockchain Association, an industry group, said the measure would simply prompt mining operations to move to other states.

Cryptocurrency mining requires specialised computers that consume huge amounts of energy. One study calculated that, as of November 2018, Bitcoin’s annual electricity consumption was comparable to Hong Kong’s in 2019.

Updated: June 03, 2022, 8:31 PM