But that is only true if transactions happen within the system. And there are other elements of crypto currency technologies that actually make fraud easier.
Many of the people who own large amounts of bitcoin have been in the crypto currency community for a number of years and know each other. They can take coordinated actions to increase or decrease prices – and because there's no real regulation of crypto currency markets, it might not even be illegal for them to do so.
There are fewer protections for crypto currency trading, in part because it's so new. For instance, a high volatility in stock prices would trigger "circuit breakers" in the U.S., halting trading and resetting prices to limit investors' losses. Cryptocurrency markets have no such built-in mechanisms.
Some countries are starting to regulate crypto currency markets, either under existing regulations or new ones. In 2015, for instance, a federal investigation found that the U.S. crypto currency company Ripple Labs had not properly followed anti-money laundering laws and rules about getting accurate customer identification information.
In May 2018, 40 jurisdictions including U.S. states, Canadian provinces and national regulators in both countries launched a formal probe dubbed "Operation Cryptosweep," to crack down on fraudulent crypto currency trading. They opened as many as 70 investigations and warned roughly 35 companies about potentially violating securities laws.
The vast majority of crypto currency trading, however, happens in countries with few regulations and lax enforcement. For instance, from early 2014 to early 2017, about 90 percent of global bitcoin trading happened through Chinese crypto currency exchanges. At least some of those businesses allegedly falsely inflated trading volumes to attract new customers. China has since banned online crypto currency trading, but people are finding loopholes.
The problems will likely shift to other countries that lack strong rules, which highlights the importance of international cooperation in investigations. Crypto currencies are a global phenomenon; the world's nations – especially those with lots of trading activity – will have to work together to protect consumers.
Nir Kshetri is Professor at University of North Carolina-Greensboro. He holds a Ph D in Business Administration from University of Rhode Island. He has authored seven books.
His 2014 book, Global Entrepreneurship: Environment and Strategy has been selected as an Outstanding Academic Title by Choice Magazine.