What Are The Legal Challenges Of Trading Bitcoin?
Bitcoin is a decentralized digital currency and this explains why critics have pointed out its negativities. Bitcoin’s decentralized nature appeals to investors because it is free from regulation by governments or banks. Money transfers across geographical boundaries are easier, quicker, and hassle-free. The cryptocurrency is founded on the groundbreaking blockchain technology that is expected to permeate a variety of industries in the future, not simply the fintech. At the same time, people are anxious and skeptical about the legal challenges it faces. So, should one invest in the Bitcoin?
What are some legal and technical challenges of the Bitcoin?
As far as the Bitcoin network is concerned, if traffic is exceptionally high, it can trigger a temporary shutdown. Likewise, if there is a failure of hard disk on your computer, you can end up losing your Bitcoin wallet. To avoid this catastrophe, Bitcoin users tend to keep multiple wallets in different locations.
Everyone knows that the Bitcoin has been embroiled in controversies time and again in the past. The Silk Road crackdown brought to light the serious consequences of misuse of this crypto for financing illegal transactions. The breach at Mt. Gox exposed the vulnerability of crypto exchanges and showed how dangerous it is to keep your coins on an exchange. Moreover, any breaking news about the crypto can affect its market price. The coin is known for being notoriously volatile and even the smallest event or trade may affect its price.
Bitcoins may have been experiencing mainstream adoption slowly but many governments continue to hold it is disregard and have even banned its use. The lack of a centralized authority to oversee the transactions and exchanges makes people doubt its credibility and security; exchanges are not regulated and hence prone to cyber thefts and hacks. There is no uniform code of conduct; neither any regulation. This could lead to an unstable system and lawsuits find it hard to resolve the loopholes and gray lines in this system. As a user, you will not get any protection from the government when you use Bitcoins.
Black market sites keep mushrooming everywhere because of this crypto. Bitcoins have become appealing to fraudsters, scammers, money launderers, and criminals. The biggest problem with deciding on Bitcoin’s legal status is whether it should be viewed as a currency, commodity, or security. While it is broadly referred to as a currency; technically speaking, a currency should be issued and regulated by a government, but the Bitcoin is not. Moreover, not every nation has made Bitcoin’s use legal. Countries like Finland, Canada, and Germany may have legalized the Bitcoin but many nations are yet to decide on its status. There is no clear statement on their behalf about how Bitcoin should be used. This non-uniformity about its legalization is perhaps the biggest legal challenge for the crypto.
This is why there is the need for specific regulation areas for the Bitcoin to counter these legal and technical challenges. These are the areas of civil law, laws for financial systems, and public law. The biggest concern for regulators in public law is to stop untraceable transactions worldwide by criminals. Consumers do not have any legal recourse because exchanges that deploy regulations for preventing money laundering cannot keep the exchanges secure. So, the bottom line is Bitcoin is hard to regulate and refined rules are needed to overcome this issue. Bitcoin has many potential uses that regulators must consider. Till that time, if you wish to transact this crypto, you must do so with caution.