Canada’s top regulator has stepped up enforcement and asset-tracing operations in response to the spike in investor losses caused by AI-powered deepfakes and complex crypto schemes.
As a new wave of financial scams arises at the nexus of artificial intelligence (AI), cryptocurrency, and a volatile geopolitical environment, Canadian regulators are raising the alarm.
The nation’s leading securities watchdog, the Ontario Securities Commission (OSC), has expressed alarm about a “massive surge” in online frauds that use AI-generated deepfakes and phony cryptocurrency trading platforms to trick investors and steal millions of dollars, according to a local article.
CEO Grant Vingoe and Executive VP of Enforcement Bonnie Lysyk spoke at the annual OSC Dialogue in Toronto on the increasingly lawless digital landscape in which scammers take advantage of weak rules, uncertain global conditions, and sophisticated technological tools to perpetrate massive fraud.
Their cautions coincide with the public’s rising interest in cryptocurrencies and the regulators’ inability to keep up.
Regulators worry that the startling $648 million in fraud-related losses that Canadians reported in 2023 is only the beginning.
Fraudulent cryptocurrency platforms, AI-enhanced impersonations of loved ones, and even complex online relationships that result in financial disaster are used to target victims.
With nearly 2,000 files in only 18 months, the OSC is overloaded with fraud cases.
A Novel Form of Fraud: Crypto Deception, Romance, and Deepfakes
Modern scammers are using advanced technology, such generative AI, to produce deepfakes in voice and video that realistically mimic loved ones or reliable connections.
These instruments are being used as weapons to plan destructive frauds that have the potential to destroy lives in a few short days.
Some scams are so complex that, before carrying out the final deceit, victims are gradually cultivated through long-term internet connections.
The OSC, a number of provincial regulators, law enforcement, and the blockchain analytics company Chainalysis collaborated on one significant project, Operation Avalanche.
Despite being preventative, these activities frequently come too late since asset recovery is particularly difficult once money have been transferred due to the anonymous and international nature of blockchain transactions.
The OSC wants to strengthen its asset-tracing skills and increase its collaborations with domestic and foreign law enforcement organizations in order to effectively address these changing threats.
Innovation and Regulation in Balance
Industry executives caution that overbearing regulation may alienate lawful actors as the OSC steps up enforcement.
Ahead of Canada’s impending federal election, one of the top cryptocurrency exchanges in the world, has made a daring declaration.
Canadian country director, Lucas Matheson, stressed in the study that Canada would lose its competitive advantage in the global digital asset race if it doesn’t have clear, innovation-friendly rules.
About five million Canadians currently possess digital assets, demonstrating the country’s solid crypto basis, according to Matheson.
86% of Canadians agree the system needs change, 80% think it is unjust, and 76% think it is antiquated, according to surveys that demonstrate the overwhelming support for financial modernization.
People claims that more stringent regulations have already led to the closure of certain exchanges in Canada, mostly as a result of ambiguous stablecoin policy and an onerous pre-registration procedure.
These ETFs, which have been approved by the Ontario Securities Commission, will enable investors to hold actual Solana and get staking rewards straight from the fund.
The combination of these events suggests that, even as they tighten down on fraud, authorities are nevertheless receptive to innovation—so long as it is properly overseen.
