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Crypto assets are becoming a more common part of the financial world. You may have heard about Bitcoin, seen news about cryptocurrency scams, or even considered buying digital assets yourself. Whether or not you plan to use crypto, understanding how it works can help you make informed choices.
This article explains what crypto assets are, how they differ from cryptocurrencies, and what you need to know to protect yourself from some common cryptocurrency‑related scams.
What Are Crypto Assets?
Crypto assets are digital assets that use encryption (called cryptography) to secure transactions and prove who owns what. canada.ca/en/financial-consumer-agency/services/payment/digital-currency.html
There are several types of crypto assets, including:
- Cryptocurrencies: These are digital currencies that don’t rely on banks or governments. Instead, they run on blockchain technology, a system that records and verifies transactions on a public ledger.
- Examples include:
- Bitcoin – the first and one of the most well‑known cryptocurrencies
- Ethereum (ETH) – a digital currency and platform that can run programs on its blockchain, such as automated agreements ("smart contracts") and online services that aren’t controlled by one company (“decentralized applications”), like marketplaces for digital collectibles
- Stablecoins: A type of crypto asset that are meant to keep a stable value. To keep that stable value , they can be tied to the value of a currency like the U.S. dollar. Some stablecoins have not maintained their stable value however. Examples of stablecoins are:
- USDC (USD Coin) and USDT (Tether) are each intended to equal $1 USD
How crypto assets differ from cryptocurrencies
All cryptocurrencies are crypto assets, but not all crypto assets are cryptocurrencies.
- Cryptocurrencies like Bitcoin can be used for payments in limited circumstances and for investment
- Other crypto assets, like stablecoins can be used for payments and are often used as a way to get into the cryptocurrency market to buy cryptocurrencies like Bitcoin while tokens used in digital applications, can enable cross-border transactions or representing ownership of something (like a stock or a digital collectible)
How cryptocurrency differs from regular Canadian currency
One of the key differences between holding cryptocurrency and keeping money in a Canadian bank account is the level of protection your funds receive. When you deposit money at a bank that is a member of the Canada Deposit Insurance Corporation (CDIC), your eligible deposits are insured — up to certain limits — if the bank fails. All Canadian banks that take retail deposits are CDIC members.
Crypto assets are not covered by CDIC or by any other federal, provincial, or territorial deposit insurance plans. This means that if a crypto trading platform or wallet provider goes out of business or becomes insolvent, there is no guaranteed way to recover your funds.
Cryptocurrency also lacks other safeguards that come with using regulated financial services in Canada. That’s why it’s important to understand the risks before buying, trading, or holding crypto assets.
What’s Happening with Regulation in Canada?
Cryptocurrency trading platforms are regulated as restricted dealers by the Canadian Securities Administrators (CSA), in Canada. Crypto regulation in Canada, for example on stablecoins is still evolving.
How to recognize common crypto scams
Scammers often use cryptocurrencies to trick people into handing over money or personal information. Some of the most common scams include:
- Fake investment schemes: Promises of high returns or “get rich quick” opportunities, often using Bitcoin or Ethereum
- Impersonation scams: A scammer pretends to be from a trusted organization or public figure and asks for payment in crypto
- Fake stablecoins: Fraudsters copy the names or logos of legitimate stablecoins and trick people into sending money to fake wallets
- Phishing attacks: Emails or texts that try to steal your wallet login or private key
- Romance scams: Victims are contacted on dating apps or social media by scammers who attempt to form a trusting relationship with the victim and then convincing them to invest in cryptocurrency. The Canadian Anti-Fraud Centre has issued a fraud alert about cryptocurrency romance scams
Why scammers love crypto
Crypto can be exciting and innovative, but it’s also a popular tool for scams. Here’s why:
- Hard to trace: Crypto wallets don’t have names attached, making it easier for scammers to stay hidden
- No recovery options: Once you send crypto, there’s no bank, card issuer, or other regulated intermediary that can help you get it back
- Global reach: Anyone, anywhere in the world, can target Canadians with fake crypto offers and cryptocurrency investment scams
How to Protect Yourself
Before you buy, invest in, or send crypto:
Research first: Look up the company, app, or exchange, and read reviews from trusted sources
Don’t believe the hype: If someone promises guaranteed returns, it’s a scam
Watch for pressure tactics: Scammers often create a false sense of urgency. Remember that Canadian government agencies will never request payment in the form of cryptocurrencies
Crypto Terms
Blockchain
A digital record of transactions that is stored across many computers instead of in one place. It’s the technology that most crypto assets run on.
Crypto asset
A broad term for digital assets that depend on cryptography and reside on a blockchain. This includes cryptocurrencies, stablecoins, tokens representing ownership of an asset, for example a stock and other digital tokens.
Cryptocurrency
A type of crypto asset designed to work like money residing on a blockchain (e.g., Bitcoin, Ethereum).
Stablecoin
A crypto asset designed to keep a stable value, often tied to traditional money like the U.S. dollar.
Smart contract
Computer code stored on a blockchain that automatically carries out an agreement when certain conditions are met.
Decentralized application (dapp)
An online service or program that runs on a blockchain instead of being controlled by a single company. Examples include digital collectible marketplaces.
Digital collectible
A unique item stored in digital form, such as artwork, music, or a video clip, that you can buy, sell, or trade online. Often called an NFT (non-fungible token).
Wallet
A digital tool (an app, device, or online account) used to store and send crypto assets.
Private key
A unique code, like a password, that lets you access your crypto assets.
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