What is cryptocurrency?
Cryptocurrency is an online payment method that uses blockchain technology. This currency can be exchanged for various goods and services across the world. Unlike banknotes and paper coins, cryptocurrency is not available in physical form. It is generally not controlled by any centralized body.
Current and proposed crypto regulations
In recent years, the regulation of cryptocurrencies has become very strict in India. The Reserve Bank of India decided in 2018 that no financial institution or bank would process such virtual currencies. In the same year, RBI confirmed that no authority had been granted to an entity to license or authorize the use of virtual currency. Instead, he warned against such illegal use. However, in 2020 the Supreme Court ruled on this cryptocurrency trading ban, ushering in a new era of digital currency use in India.
The future of cryptocurrencies is in great uncertainty. Rumors have it that the center is considering introducing a bill that will contain provisions banning a cryptocurrency exchange.
At the United Nations, several cases of fraud have been reported in recent years. Almost 119 billion dollars of transactions were deemed suspicious in 2019 as suspicious activity goes undetected as banks struggle to keep pace. FinCen had proposed new rules in December 2020, which aimed to reduce these types of fraud and suspected cases. However, the Biden administration has suspended the rules until further notice.
Legal issues regarding the use of cryptocurrencies
The United States Attorney General’s Cyber Digital Task Force listed three main concerns:
- Investment fraud and cryptocurrency theft.
- Avoid taxes and launder money using cryptocurrencies.
- Commit financial terrorism and crimes through the use of cryptocurrencies.
Anonymity is the biggest threat in the cryptocurrency world. Due to the anonymous identities that conduct the transactions, criminal activity is difficult to trace. Various enhanced cryptocurrencies such as Monero, Zcash, etc. were published to make tracking difficult.
Silk Road is one of the best known examples of cryptocurrency crimes. This was a site that operated between 2011 and 2013 and dealt with various criminal activities. For example, the exchange of false documents, illegal goods and services, etc. Customers used bitcoin to pay for services so no one could track them. The site’s founder was tried in 2015 for this crime.
Cause of caution when investing in cryptocurrencies
the cryptocurrency exchange it is not considered legal in the United States. No government or central bank supports this type of trade. Although the returns on investing in cryptocurrencies can be extremely high, there are many risks associated with it. Due to the anonymity of transactions, hackers have the ability to sabotage the process. Once lost, bitcoins cannot be recovered. Being very volatile, the cryptocurrency is unlikely to become a stable currency anytime soon. If FinCen regulations are adopted, the level of consumer protection and safety will improve to some extent.
The Mount Gox cryptocurrency exchange example is intended to be cautious against investing in cryptocurrencies. The exchange was hacked in 2014, resulting in a loss of hundreds of millions of dollars in bitcoin. It is therefore necessary to choose the best cryptocurrency brokers for a safe bet.
Without a doubt, cryptocurrency has the potential to make huge profits. But with the benefit comes several risks, which are just as enormous. There aren’t a lot of customer safety nets in this context, which makes it more of a problem to manage. Therefore, before trading or investing in cryptocurrencies, always check the risks associated with them. Making an informed decision will minimize the risk of loss.