Experienced Bitcoin Team of Attorneys and Consultants
Bitcoin is the most popular cryptocurrency. Little by little, small businesses, online marketplaces, and banks are accepting Bitcoin as a payment method.
But the price volatility of Bitcoin and unstable market of cryptocurrencies have put the federal government on high alert of individuals and businesses using Bitcoin.
Before your business uses Bitcoin or decides to accept Bitcoin in its daily operations, there are a few things you need to consider. An experienced cryptocurrency and blockchain attorney can help evaluate the risks, benefits, and uses of Bitcoin for your business.
At Oberheiden, P.C., we have an experienced and knowledgeable team of cryptocurrency and blockchain attorneys and consultants. We can advise you on how Bitcoin will impact your business as well as conduct a compliance review of your business operations once it begins to use Bitcoin.
Do not make such a big move without getting the legal advice you need. Put Oberheiden, P.C. on your side today to resolve your uncertainty and get the clarity you need.
Bitcoin in Brief
Bitcoin is a type of cryptocurrency. It is the oldest and most popular cryptocurrency. Bitcoin operates using peer-to-peer technology on blockchain technology.
Bitcoin is distinct from fiat currencies such as the U.S. dollar because it is not backed by anything. Fiat currencies are backed by either the government or the central bank. Bitcoin´s value is instead based on supply and demand.
Over the past decade, individuals and businesses have traded Bitcoin in considerable amounts and at varying values. Bitcoin today is being used similar to other currencies—it is used for both investment purposes and payment purposes.
The anonymity of Bitcoin has caught the eye of federal agencies who continue to investigate individuals and companies who make significant uses of Bitcoin.
5 Things to Consider Before Buying Bitcoin
Before your business buys Bitcoin for investment reasons or decides to utilize it in its operations such as by allowing customers to pay with Bitcoin, there are a few considerations that are worth noting:
Bitcoin offers many benefits such as efficiency and security, but it also carries several important risks—namely market volatility—that many individuals and businesses overlook.
Before investing in Bitcoin, businesses should understand the key benefits and risks for their business. The fact that everyone else is investing in Bitcoin and returning a profit is insufficient.
The immediate benefits include the fact that Bitcoin does not need a third party or other intermediary to facilitate transactions. This makes transactions cheaper and eliminates many of the delays associated with using and relying on third parties.
Bitcoin transactions can be completed from anywhere in the world as long as there is an internet connection. This is very attractive to businesses so that they easily make use of these cross-border transactions that are instantaneous, efficient, and inexpensive. Bitcoin transactions are also characterized by significant security.
As for the risks, Bitcoin is not backed by a government or central bank and therefore lacks the typical government protections and initiatives that aim to prevent crime and money laundering.
Many Bitcoin-related projects have been hacked and have caused businesses and investors to lose substantial amounts of money. All these hackers have to do is find a way to steal your “keys” and gain access to your digital wallet. Then, everything in your wallet would be gone in a matter of seconds.
This is true regardless of whether your business is planning on using Bitcoin as an investment or as a currency. Businesses need to be aware of both the benefits and risks of adopting Bitcoin as a core component or even a side part of their businesses.
Bitcoin—along with practically every other cryptocurrency—still exist in an unknown environment.
There is so much unknown about blockchain technology and cryptocurrencies. Understanding its inherent value, the reasons people are investing in it, and how to best regulate something that has no official backing are all very challenging endeavors.
We know businesses are willing to get involved with Bitcoin but the lack of a consistent approach by federal agencies fosters more uncertainty and adds to the volatile nature of Bitcoin.
From deciding whether your Bitcoin or Bitcoin-related offering and project are “securities” or how to properly report your Bitcoin transactions and sales/dispositions are key areas subject to much uncertainty.
Bitcoin transactions are not regulated by the federal government, nor is there a single, comprehensive piece of legislation that regulates or attempts to regulate Bitcoin transactions and investments.
Businesses need to understand that there is no federal legislation on cryptocurrencies and blockchain technology. Instead, when investigating companies using Bitcoin, federal agencies will focus on already-existing legislation—such as the securities laws, investment advisory laws, banking laws, anti-money laundering legislation, the U.S. tax code, and so on.
Because of this lack of regulation, there is little investor protection. As a result, federal agencies are very suspicious of companies that use and/or accept Bitcoin within their businesses—either internally with the company´s personnel or externally with investors, customers, or other members of the public.
Unless and until the federal government provides affirmative and consistent guidance on these issues, it may be difficult for Bitcoin to reach its full potential within businesses.
Therefore, hiring an attorney who has an excellent working knowledge on these statutes and how the federal government could apply them to the facts of your case is imperative.
You should always have a way to cash out or liquidate your Bitcoin.
Bitcoin investments are generally kept in digital wallets. This keeps your Bitcoins secure. Many cryptocurrency exchanges allow users to purchase cryptos such as Bitcoin and then transfer them to a wallet that the user creates. Then, the individual can cash out the Bitcoin into fiat currencies such as the U.S. dollar.
Wallets are useful because they keep a business´ Bitcoin safe from hackers. Online exchanges typically allow users to withdraw Bitcoin into either the user´s linked bank account or the user´s linked PayPal account. Once the cash is withdrawn, the business can use the funds as normal.
However, it is critical that businesses ensure that there is a way they can “cash out” their investment for any reason.
It is highly likely that your investments into cryptocurrencies such as Bitcoin are not insured.
Bitcoin does not have FDIC insurance. In addition, as mentioned, Bitcoin is not backed by the federal government or any central bank. Its value is based on its scarcity and is driven by the supply and demand of Bitcoin. Because of this, the value of Bitcoin is very volatile.
In fact, cryptocurrencies are riskier than any other investment. People who invest their life´s savings may see much of the value disappear due to crypto market fluctuations.
Bull runs are often followed by multiple corrections, which cannot always be predicted. Businesses need to consider this before getting too “invested” in Bitcoin. Getting advice from an experienced crypto attorney as to how Bitcoin fits into your business model will help you better understand these risks.
Need Advice on Bitcoin and Businesses?
Bitcoin is a cryptocurrency whose popularity continues to gain the attention of businesses. From cheaper transaction costs to simplified global payments, Bitcoin offers many advantages.
Before deciding to use Bitcoin within your business, there are several key considerations to keep in mind. If you need help on evaluating the considerations identified above or any other consideration, it is time to speak to an experienced blockchain and cryptocurrency attorney.
At Oberheiden, P.C., our team of attorneys can identify and explain how Bitcoin can impact your business—even before you formally adopt a plan that incorporates Bitcoin into your operations.
Do not wait. Get the advice you need before you take any substantial steps. Call or contact us today for a free consultation.