Canada’s Regulator Warns of Rising Investor Threat as AI Deepfakes Fuel Crypto Scam
Canada’s regulators are sounding the alarm as a new wave of financial scam emerges at the intersection of artificial intelligence (AI), crypto, and a volatile geopolitical climate.
According to a local report, the Ontario Securities Commission (OSC), the country’s top securities watchdog, has raised concerns about a “massive surge” in online scams that utilize AI-generated deepfakes and fake crypto trading platforms to deceive investors and siphon off millions.
During the annual OSC Dialogue in Toronto, CEO Grant Vingoe and Executive VP of Enforcement Bonnie Lysyk described an increasingly lawless digital environment where scammers exploit unstable global conditions, weak regulations, and powerful tech tools to commit fraud on an industrial scale.
Their warnings come amid growing public interest in crypto and regulators struggling to keep pace.
In 2023, Canadians reported a staggering $648 million in fraud-related losses, and regulators fear that is only the tip of the iceberg.
Victims are targeted through AI-enhanced impersonations of loved ones, fraudulent crypto platforms, and even elaborate online relationships that end in financial ruin.
The OSC is inundated with fraud cases, receiving over 2,000 files in just 18 months.
A New Kind of Scam: Deepfakes, Romance, and Crypto Deception
Today’s fraudsters are utilizing cutting-edge technologies, such as generative AI, to create audio and video deepfakes that convincingly impersonate family members or trusted contacts.
These tools are being weaponized to orchestrate devastating scams that can ruin lives in a matter of days.
Some schemes are so elaborate that they involve grooming victims through long-term online relationships, slowly building trust before executing the final deception.
One major initiative, Operation Avalanche, involved collaboration between the OSC, several provincial regulators, law enforcement agencies, and blockchain analytics firm Chainalysis.
Over two days in March, officials tracked compromised Ethereum wallets and warned 89 investors that their assets were at risk.
Although proactive, such operations often arrive too late, as the anonymous and borderless nature of blockchain transactions makes asset recovery extremely challenging once funds have been moved.
To better respond to these evolving threats, the OSC aims to expand its partnerships with local and international law enforcement agencies and refine its asset-tracing capabilities.
Balancing Regulation and Innovation
While the OSC doubles down on enforcement, industry leaders warn that heavy-handed regulation may drive away legitimate actors.
Coinbase, one of the world’s leading crypto exchanges, recently issued a bold statement ahead of Canada’s upcoming federal election.
In the report, Lucas Matheson, Coinbase’s Canadian country director, emphasized that without clear, innovation-friendly regulations, Canada could risk losing its edge in the global digital asset race.
According to Matheson, Canada already has a strong foundation in crypto, with roughly five million Canadians owning digital assets.
Surveys show overwhelming support for financial modernization, with 86% of Canadians saying the system needs reform, 80% finding it unfair, and 76% believing it’s outdated.
Coinbase argues that stricter rules have already caused some exchanges to exit Canada, primarily due to unclear policies around stablecoins and a burdensome pre-registration process.
To fix this, Coinbase proposes a detailed roadmap for the next federal government, including the creation of a national crypto strategy task force, the establishment of a government Bitcoin reserve, and regulations to support staking, crypto banking, and the development of AI-powered data centers.
In the meantime, Canada has taken a significant step forward by approving North America’s first spot Solana ETFs with staking functionality.
Approved by the Ontario Securities Commission, these ETFs will allow investors to earn staking rewards directly through the fund while holding physical Solana.
Looking forward, the mix of these developments indicates that while regulators are cracking down on fraud, they are also open to innovation, provided it’s well-supervised.
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