Regulation of Cryptocurrencies – Legal Challenges and Risks

Abstract

Bitcoin and Ethereum have increasingly become the focus of public attention in recent years. Both are cryptocurrencies, decentralized digital assets, both can be used as a decentralized currency. Their value is generated by the public agreement. The advantage of cryptocurrencies is that they enable safe and simple transactions between two parties, without an intermediary. They are digital currencies based on blockchain technology. Cryptocurrencies have unfortunately become targets of fraudsters and criminals due to their rapid rise in popularity. In addition to the technological innovations and financial opportunities offered by digital currencies, the question of the ethical dimension also arises. How do cryptocurrencies comply with ethical principles, especially regarding the ethics of money, since not everyone has access to the profits they generate? The anonymity of digital currencies can facilitate money laundering, terrorist financing and other illegal transactions. In addition, there are concerns about their energy consumption and environmental impact. Therefore, there is a need for effective regulation to prevent fraud and abuse and to protect investors. The use of cryptocurrencies can make it difficult to establish the identity of the parties involved (anonymity and pseudonym), which encourages fraud, money laundering and other illegal activities. The price of cryptocurrencies can fluctuate significantly (volatility), which can cause serious financial losses to investors. Cyber-attacks, hacking incidents and technical errors can ultimately lead to the loss of crypto-assets (technological-security risks).