The rising interest in cryptocurrency remains no unknown fact. Amidst the bearish market (that the market currently is), there is a stiff rise in discussions surrounding the legality of cryptocurrency. Although the core existence of cryptocurrency as a financial asset is often questioned, several allied questions come up here and there.
Regulatory Concerns
Bitcoin and many other cryptocurrencies are now legal in many countries. In those, where they are not legal, chances are they will be adopted smoothly in the future. However, regulatory and legal complications hover over them because of the absence of a centralized issuing authority. The absence of such authority does lead to complex legal issues such as the attribution of responsibilities. Any issue in completing crypto transactions cannot easily be attributed to a central authority, thus leading to more complex legal issues arising in the future.
Tax Implications
Cryptocurrency is taxed differently across different countries. In the US, they are effectively taxed as property rather than currency. Every other country seems to have its take on interpreting crypto for tax. Many jurisdictions on the other hand take a view that digital currency is a means of payment or a medium of exchange. It can be charged anywhere between 0-57% in Sweden to almost 30% in India.
Privacy Concerns
The blockchain, at first instance, promises complete anonymity in transactions as well as a departure from regulatory issues. That is one of the most prominent selling points for the entire network. However, take for example the Bitcoin blockchain; the public nature of the blockchain enables the identification of usage patterns of certain addresses and transactions. Services are now available to detect money laundering and compliance violations. Although the revelation of the digital identities of individuals who take part in transactions is not the same as knowing the real identities of individuals involved, apparently this remains an issue that is to be addressed.
Jurisdiction
Let us assume for a moment that you are a crypto investor who is now willing to initiate a contractual dispute lawsuit against a particular transaction. The biggest question that you might have is: Where do you do this? The conflict in legal frameworks is real given the cross-border nature of the blockchain framework. Determining the exact jurisdiction for a blockchain dispute is not just difficult but seemingly impossible. The ledger maintained by nodes across the world will give rise to serious conflicts between states who will assert jurisdiction over the blockchain-enabled platform.
Smart Contracts
Smart contracts are based on shaky conceptual foundations. Most traditional contracts are legally binding agreements. Something goes wrong, and you can simply choose to have legal recourse. However, code-only smart contracts and agreements are difficult to determine a potential breach. Additionally, flaws in contract design make it vulnerable, now since they facilitate transactions worth millions. These flaws are simply not easy to correct on the blockchain network.
Rise of Legal Challenges
The ever-evolving cryptocurrency scenario is likely to give rise to more legal issues surrounding it. Now more than ever when the cryptocurrency market is staring at a potential collapse, the challenges around legality are expected to be more than ever. Add to that, the recent controversy surrounding Do Kwon and the cashing out scandal, and lawsuits range on the higher side. The recent bearish market also saw accusations flying in for Celsius of committing serious financial fraud. However, all legal issues surrounding crypto are here to stay with multiple interpretations and accommodating factors of each state playing a huge role.
If you are a crypto investor, entrepreneur, or commercial enterprise who is confused have questions about the entire cryptocurrency scenario, we can certainly extend our expert helping hand. From taxation issues to cross-border regulatory issues, we have the expertise in place to sort it out for you.
