Legal pitfalls of crypto currency
Introduction
Cryptocurrencies are the latest craze in the financial world. The technology that makes them possible is called blockchain, and it’s been around since 2008. Blockchain allows for secure transactions without the need for a middleman. You can think of cryptocurrency as digital cash that’s not controlled by any government or bank; it’s run by its users all over the world. While cryptocurrencies have many benefits, there are also legal pitfalls to be aware of before investing in this growing market:
Taxation of crypto-currency
Taxation of crypto-currency is a complex area of law. The U.S. Internal Revenue Service (IRS) has issued guidance on the taxation of virtual currency, but much remains unsettled.
Any discussion of tax issues in the context of crypto-currencies must begin with an understanding that crypto-currency is not a currency at all; rather it is an asset or commodity like gold or real estate. Accordingly, it has been treated as property for federal income tax purposes by both the IRS and the Tax Court since 2014 (see our previous article). Crypto-currency can be taxed as income or capital gains depending on how long you hold your coins before selling them and whether they are purchased with cash or fiat currencies like dollars or euros
Regulation of crypto-currency.
Cryptocurrencies are not regulated by the SEC or any other government agency. Cryptocurrency exchanges, where you buy and sell your currency, also fall outside of the regulation of traditional financial institutions. This means that there are no protections against fraudulent activity on these platforms, nor is there any recourse if something goes wrong with your account (such as identity theft). You’re largely on your own when it comes to protecting yourself from fraudsters—and in some cases, even if you manage to get some money back from an exchange or wallet provider after reporting their misdeeds, they may simply close shop and disappear into thin air with all their customers' funds!
Crypto-currencies are here to stay.
Cryptocurrencies are here to stay. They represent a new way of doing business, one that is not going away. In fact, it's likely that we'll continue to see cryptocurrencies become more prominent in our lives over time as they continue to be adopted by businesses and individuals alike.
The legal rights of cryptocurrency owners depend on the type of cryptocurrency being owned and the laws where the owner lives.
Use legal advice to understand the law in your region before getting into cryptocurrency
In order to understand how to use crypto currency, it is essential that you consult with a lawyer. Lawyers can help you set up your accounts and understand the tax laws that apply to cryptocurrency. These experts can also provide legal advice about how to avoid legal pitfalls when using crypto currency.
Conclusion
It is clear from the above that crypto-currency is still in its infancy and there are many legal issues that need to be addressed. However, it is also clear that there will be a time when these issues will have been resolved and crypto-currencies can function as freely as other currencies do today.