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Top 3 legal risk factors of cryptocurrency

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Top 3 legal risk factors of cryptocurrency

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  1. Top 3 legal risk factors of cryptocurrency for investors

  2. Business risk  • Therisk of cryptocurrency is because they are still in their infancy and hence exposed to a significant degree of unpredictability. Speculators aiming to benefit from the short- or long-term holding of digital currencies have flooded online trading platforms, resulting in a significant increase in trading activity. • When it comes to the legal risks of cryptocurrency, there is no backing from a central bank, a national or international organization, assets, or other forms of credit. Instead, the value of cryptocurrencies is determined solely by the value that market participants place on them through their transactions. As a result, when confidence in cryptocurrency is lost, the risk of trading cryptocurrency activities can collapse, causing a steep drop in value.

  3. Cyber and fraud-related risks • Because cryptocurrency is essentially a cash currency, it has attracted the attention of a large segment of the criminal community; these criminals can break into cryptocurrency exchanges, drain cryptocurrency wallets, and infect individual computers with malware that steals cryptocurrency.  • As more and more transactions are made on the internet, hackers increasingly target individuals and service processing and storage locations, using techniques such as spoofing/phishing and malware. When it comes to protecting their cryptocurrency investments against the problems and risks of cryptocurrencies, investors must depend on the strength of their computer security systems and the strength of security systems offered by third parties.

  4. Operational risk  • As part of the benefits of using an established centralized clearinghouse to ensure the authenticity of financial transactions, there is also the capacity to reverse financial transactions in a coordinated manner; this is not achievable with a cryptocurrency. Because Bitcoin accounts are cryptographically guarded, access to the funds held in a Bitcoin account is very probably not possible to recover if the “keys” to a Bitcoin account are lost or stolen and later removed from the owner’s possession.

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