Cryptocurrencies have been around for over a decade; However, only in recent years has the mainstream recognized the full extent of its usefulness. Whether your business is using bitcoin as a hedge against traditional currencies, trying to avoid the exorbitant fees charged by financial services institutions, or simply looking for an efficient way to pay, there is no doubt that its popularity and usefulness as an acceptable currency is growing. has shot.
However, with that popularity comes a greater need to protect your organization. You may have heard of bad actors (like crypto-exchange-arrested-bahamas-charges-sdny”>Sam Bankman-Frito) who use cryptocurrencies to commit money laundering and fraud, or scammers who take advantage of the anonymity of cryptocurrencies to make easy money. Although bad actors abound in all economic spheres, with cryptocurrencies being a relatively new frontier, it is crucial that you are aware of potential threats and able to recognize them.
Likewise, that popularity comes with a higher level of scrutiny. Federal regulations for cryptocurrencies have changed, and not being informed about how those regulations affect your transactions could put your organization at risk.
In this article, we'll discuss some of the most common dangers associated with using bitcoin, teach you how to spot and avoid cryptocurrency scams, and educate you on how regulations can impact how your organization uses bitcoin.
Learn the nuances of the currency
Although using any type of currency carries some level of risk, bitcoin is different from traditional currencies and comes with rules that you, employees or customers may not intuitively understand. If you're thinking about using cryptocurrencies, there are some key differences to keep in mind:
- Price Volatility: Because the value of cryptocurrency is not regulated by an outside party, it is largely determined to be worth what someone else is willing to pay for it.
- Lack of federal protection: The downside of not having the federal government to regulate your funds is that it is unlikely to provide protection if funds are lost. With bitcoin, once money is lost, it's lost, a fact that has led some to take extreme measures to recover lost cryptocurrencies.
- Privacy on Blockchain: While cryptocurrency transactions are largely considered anonymous, some of the information is often publicly registered on the blockchain. Measurements like hard drive destruction can provide an additional layer of security in these cases, preventing bad actors from digitally tracking your transactions and accessing your organization's sensitive data.
Keep in mind that in an industry as digitally focused as bitcoin, data is king. If you have unsecured data that a cybercriminal could obtain, make sure it is adequately protected before you venture into the blockchain. Failure to ensure adequate layers of security risks your organization's data being exploited.
Avoid scams and protect your organization
What's more, bad actors may attempt to use the anonymity associated with the blockchain to scam unsuspecting bitcoin. However, scams targeting businesses often try to use the same “tried and true” schemes over and over again, a strategy that loses its potency when people can recognize their all-too-familiar patterns.
Some of the most common Scam Tactics Your Business May Encounter include classic strategies such as:
- Identity fraud;
- robocalls;
- Social engineering;
- Malware.
In fact, concerns about scams and theft are a big reason why crypto-anti-fraud-regulations/”>some call for better crypto anti-fraud regulation. However, until regulations are in place, one of the most effective ways to protect yourself against these types of scams is to simply know what they are like, both in general and in the context of crypto scams specifically. If you and your employees know what to look for, you will be less likely to fall for the scam and ensure you have the protection you need, given the relative lack of legal protection available.
Align with regulations
As mentioned above, regulations for bitcoin are starting to change. While this may be a concern for those unaware of those regulations, it is also exciting for the overall potential of bitcoin as a whole. Some governments are leveraging regulations as a weapon against bitcoin's potential, but others have advanced regulations to the point that they are comfortable using the currency to verify election results.
While the effectiveness and intent behind regulatory measures currently differ from country to country, the growing popularity of bitcoin is encouraging the development of crypto-Narain-Moretti”>more positive international regulations.
In the US, it is legal to buy and sell cryptocurrencies, and the Biden administration has crypto-regulations-bitcoin–ethereum/”>announced initiatives support the legal use of cryptocurrencies and penalize bad actors. However, the concrete details of those initiatives remain murky, making it unlikely that federal regulations will directly impact your organization's use of cryptocurrencies at this time.
In the absence of coordinated federal oversight, cryptocurrency regulation varies from state to state. You can take advantage of sites like Bloomberg Law to see a aggregated summary of crypto laws for your state or territory, but we'll quickly break down some examples of what these laws look like.
- New York requires bitcoin buyers and users to obtain a state-only “BitLicense” before selling, buying, or using bitcoin commercially.
- Tennessee does not consider bitcoin transactions “money transmission,” but requires a license to exchange bitcoin for fiat currency.
- Florida considers all uses of bitcoin to be subject to money transmission laws and therefore require a license; However, licensing laws have generally been relaxed.
- California has not decided whether it will regulate the use of bitcoin and currently has no laws to oversee individual or corporate transactions.
As you can see, cryptocurrency regulation is a complex and nuanced topic, and regulations are always evolving at both the federal and state levels. You will need to do some research on how your state governs the use of currencies like bitcoin before using them in your organization, as you will want to ensure compliance with local laws.
Staying aligned with changing regulations, employing strategies to avoid scams and protect your data, and knowing the nuances of cryptocurrency exchanges will allow your organization to navigate this industry with confidence.
This is a guest post by Miles Oliver. The opinions expressed are entirely their own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
