A Discussion On The Legal Risks To Cryptocurrency Investors – Part 2

It is here that the post leads to different reasons why the legal risk suffered by crypto investors is huge. The following is a continuation from the previous post. Read about the remaining factors.

Thereby The Decentralized Status

As a potential risk factor for the individual investor is also one of the great draws of many digital currencies hereby Bitcoin has paved the way for other cryptocurrencies in that it is decentralized meaning it has no physical presence as it is not backed by a central authority. To assert their regulatory power in various ways, the governments around the world have stepped in as BTC and other digital currencies like it remain unattached to any jurisdiction or institution whereas on one hand it frees investors from being beholden to those institutions and on the other hand the status could probably result in legal complications. It is true across all currencies, digital or fiat that the value of digital currencies is dependent entirely upon the value that other owners and investors ascribe to them without a central authority backing the value of digital currency as investors may be left in the lurch should complications with transaction and ownership arise. 

There is a potential risk associated with cryptocurrencies as a result of the decentralized status has to do with the particulars of transactions while the currency is mostly with a physical presence changing hands. Thereafter a trusted financial institution is involved in creating and settling deposits and debt claims in the case of electronic money where neither of these concepts applies to cryptocurrency transactions. It is therefore the legal confusion between parties in various types of digital currency transactions is a real possibility because of this fundamental difference and also once again attributed to the decentralized state of these currencies, the path of legal recourse in these situations can be difficult to assess. 

The Business Registrations and Licensing

There are a growing number of businesses that are taking advantage of digital currencies as a form of payment as also businesses may be required to register and obtain licensure for particular jurisdictions and activities as in other financial areas. The areas are significantly less clear for businesses operating in the crypto market owing to the complex and evolving legal status of digital currencies. They may be required on the other hand to submit to special considerations depending upon their jurisdiction as the onus of responsibility falls on business owners and managers to insure that they are following proper legal procedures for their operations at both the local and state levels. For example, at the federal level, the financial institutions must, therefore, maintain certain activities related to protections against money laundering and fraud, the transmission of funds, as well as more of them. Applying to businesses dealing with digital currencies the considerations like these also apply. 

About Fraud and Money Laundering

With a new means of committing fraud, money laundering and a host of other financial crimes, there is a widespread belief that the cryptocurrencies provide criminal organizations even though it may not directly impact most cryptocurrency investors as who do not intend to use this new technology to commit such crimes as investors find themselves in the unfortunate position of being a victim of financial crime as it does not likely have the same legal options as those enjoyed by traditional victims of fraud. 

The decentralized status of digital currencies has the issue related to it when the crypto exchange is hacked and customer holdings are being stolen for instance as there is frequently no standard practice for recovering the missing funds. Taking a certain amount of the risk digital currency investors purchase and hold cryptocurrency assets. The developers and start-ups, for this reason, are related to digital currency having focused such a great deal of attention on creating secure means of holding digital coins and tokens. It is still new types of wallets that are being released all the time while cryptocurrency exchanges are always improving their security measures. Hereby it is found that finally investors have so far not been able to fully eliminate what is is the legal risks associated with owning cryptocurrencies as its likely that they never will. 

The Concluding Words To Finally Wrap Up The Discussion 

It remains to be seen what the decentralized ledger technology brings going forward with the evolution. As technology underlying blockchain and cryptocurrency keep finding newer applications, there is one reason investors and start-ups are together finding the crypto world exciting which is its unregulated feature. With no more regulations from central banks, the investors are free to use the mined coins for anti-social activities and the lone reason for fear is hacking, theft, and fraud suffered by many of the present crypto exchanges like the Mt. Gox. 

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