How to protect yourself from crypto scams in the UAE

Francesca Greco from X8Currency outlines five key factors to consider when choosing a cryptocurrency operator



Cryptocurrencies are gaining traction globally, and in the UAE, with the public sector pushing towards adopting blockchain technology, digital currencies are steadily becoming popular.

But while cryptocurrencies and blockchain projects are often portrayed as being “unregulated and fraudulent”, this is not always the case, opines Francesca Greco, co-founder and director at X8 Currency.

“However, investors should make prudent decisions prior to purchasing a cryptocurrency,” she adds.

She lists the key factors that investors should understand prior to entering the industry.

Five facets to examine in a cryptocurrency operator

1. How strong is the project’s ‘Know Your Customer’ (KYC) and ‘Anti-Money Laundering’ (AML) process?

The KYC process is a universal feature of the financial ecosystem and is evident in the crypto regulatory framework that has been issued by the Abu Dhabi Global Markets (ADGM).
As an investor, it is important to compare the crypto operator’s KYC process with the Financial Action Task Force (FATF) guidance issued on cryptocurrencies.

At a minimum, the company should require proof of address and passport copy from the investor, while virtual identity verification is an added benefit, whereby investors hold a video conference with a KYC analyst to ensure the person in the passport copy is the same as the user that will operate the account.

2. Is the legal framework governing the cryptocurrency fully developed?

This cannot be overstated since the importance of this facet is growing rapidly. Abu Dhabi’s ADGM announced the inauguration of its arbitration centre in October 2018 that will be governed by the UK legal framework and provide support to investors injecting equity into the Middle East. The DIFC is also governed by the UK legal framework and litigations are presented at the DIFC courts for resolution.

3. Is the regulatory framework fully developed?

The DFSA governs the DIFC in Dubai and follows the UK regulatory regime developed by both the FCA and PRA. The ADGM is regulated by the FSRA, which also issued a regulatory guidance on crypto asset operating businesses earlier in 2018.

The DFSA has been more bearish towards cryptocurrencies, issuing a regulatory caution in 2017. However, given the UAE is currently considering launching a digital currency (EMCash) backed by the Dubai Economic Department and EMCredit, the UAE’s credit bureau agency, the regulatory framework around cryptocurrencies is expected to develop quickly.

4. Is the exchange listing the cryptocurrency adequately developed?

When assessing the exchange, the investor should consider three main factors:

* Does the exchange have a rigorous KYC process for onboarding investors to ensure AML risk is mitigated?
* Is cybercrime risk mitigated through the underlying infrastructure supporting the exchange and protecting the servers used within the exchange?
* Is the liquidity within the exchange adequate to support large scale transactions that may be performed by larger investors that seek to speculate within the market?

5. How is the cryptocurrency backed? Does it have strong asset support?

Investors should ensure that the product they are purchasing has an intrinsic value and is backed by a tangible asset to ensure devaluation risk is mitigated or managed on a best efforts basis.

There are many providers in the market that are claiming their product is a stable coin; however, one ought to understand the nature of the basket supporting the currency.

Typically, it can be one fiat currency, a basket of fiat currencies or a basket of fiat currencies along with the price of gold coins. The best combination is to merge the underlying fiat currencies with the price of gold coins to ensure the crypto currency benefits from broader risk diversification.

X8 Currency has combined eight global fiat currencies with gold coins to ensure the basket is supported by a well-diversified reserve that will preserve value for the investor and mitigate the risk of prompt price devaluation.

What X8Currency brings to UAE investors

X8C possesses two main features that are providing a competitive edge within the crypto markets: stability and security.

“Our unique fintech software (ioNectar) is the backbone of the X8C product,” says Greco.

There are several features that make X8Currency stand out in the crypto industry that appeals to UAE based investors, including –

1. Price stability using artificial intelligence to manage the currency reserve underlying the X8C currency.
The AI system makes decisions in milli-seconds and can protect the investment against rapid currency devaluations within the market. The technology at its core has a proven track record of operating live accounts since 2016.

2. Unparalleled KYC processes utilising blockchain technology to mitigate financial crime risks.
The project’s headquarters are in Zug, Switzerland where it has obtained an asset management licence regulated by the Swiss financial regulator’s (FINMA) requirements, with KYC and AML processes included.

3. Encrypted IT infrastructure that prevents cybercrime risks.
X8Currency will be ideal for investors who do not seek quick gains from crypto volatility but are here for medium or long term positions and want to preserve value and make sustainable returns.

X8Currency preserves your wealth better than fiat money because it actively fights inflation and provides sustainable returns. The team is currently in talks with UAE regulators to make sure this ground-breaking service is available to UAE investors in 2019.

X8 Currency is also looking to develop sharia compliant offerings within the GCC that will help Muslim investors and fund managers that manage Islamic investment funds place their equity into sharia compliant products.

With X8Currency you can preserve your wealth in an unprecedented manner that is easy and safe.