Digital currencies are a new way to buy and sell goods and services, and to invest money. Bitcoin and its counterparts have a number of new features, built upon a long history of economic innovation. This gives virtual currency many appealing features, but these transactions still involve some risks. California digital currency attorney Roger E. Naghash has the knowledge to advise you on the advantages and disadvantages of using these payment methods. From his office in Orange County, Mr. Naghash serves clients throughout the United States.Common Features of Digital Currencies
There are still plenty of old-fashioned cash transactions using coins and printed dollars. In the case of digital currency, by contrast, trades are electronic.
Digital currencies tend to have electronic ledger systems that publicly record every transaction. Although they are not stored centrally, these are similar to banking ledgers that show your transactions and banking balance. Most ledger systems record transactions in a digital “currency” that behaves somewhat like an asset and gets recorded like money. These units of value are regarded like “dollars” in your account.
Huge amounts of U.S. dollars are already traded through electronic ledger transactions. Banks use them for inter-bank transfers. You use them if your paycheck is deposited directly into your bank account, and you buy things with a debit or credit card.
Encryption is used to verify the transactions and maintain the integrity of the ledgers. Encryption can also help keep account holder names anonymous.Disadvantages of Using Virtual Currency
Unlike traditional currency, digital currencies are not backed by the government of any country. Governments continuously work to maintain the value of their currencies. When a country’s currency begins to rapidly devalue, that nation can marshal its economic resources to try to stabilize the currency’s value. A country may even enlist aid from its economic allies to restore stability to its currency.
Virtual currencies are not so well established and protected. These currencies are like free-market orphans, subject to potentially frequent and sudden changes in value. They are also ripe for exploitation because of the anonymity, speed, and lack of reversibility of transactions. It can be hard to get a refund when one is needed. They are largely unregulated when compared to traditional currency and ordinary banking transactions. Unlike traditional banks, the transactions and ledgers are typically not insured.
Digital currencies are subject to specific types of problems. Sometimes digital currency exchanges behave in ways that seem fraudulent. Or individual transactions can simply fail. Unfortunately, the speed and irreversibility of transactions can also attract fraud. In this volatile new economic frontier, some currencies simply collapse, leaving investors to pick up the pieces. In many of these grim circumstances, a person may need to hire a virtual currency attorney.
As some countries move to tax and regulate digital currencies, changes in legislation have led to further price instability. People become concerned when a national legislature can arbitrarily ban or severely limit the use of digital currencies. Even when this impact is mild, you may need the assistance of an electronic currency attorney to help navigate the shifting taxation and regulatory landscape.
Virtual currencies have advantages in some situations, but they are also fraught with new perils, and this has slowed public acceptance. This remains one of the key challenges. Money is only worth as much as people “say” it is worth, and new digital currencies are no different in that regard.Discuss Your Digital Currency Questions With a California Attorney
Whether you need assistance complying with Bitcoin regulations and tax policy, or you need help recovering from a virtual currency pitfall, you should get a skillful advocate on your side. Digital currencies involve a host of potential legal problems, some old and some new. From his California office, virtual currency lawyer Roger E. Naghash has gained a deep familiarity with both traditional and digital transactions. Call us at (949) 955-1000 or contact us online to enlist our services.