Topic: What are the consumer risks by using bitcoins? [ACADEMIC] (Read 449 times)

Well there are many risks that consumer will by using Bitcoin. In addition to the price risk from the fluctuating exchange rate, there is currently a very heated debate about the bitcoin 'software' with competing proposals on how to scale bitcoin in order to facilitate more transactions. Without going too much into detail, the discussion questions some of the core principles of bitcoin. well there is no such thing that has no risks when you take a crypto currency or digital currency there is always a risk that will need to take to learn from it.

I feel there is not really any risk involved in bitcoin just the one that bitcoin is a new digital currency which many people have not yet been accepted, and there is a risk in investing in bitcoin. I am also studying bitcoin that what exactly will be the future of bitcoin, because someone will take risk while investing in bitcoin as he do not know the future circumstances. Otherwise bitcoin has no consumer risk.

I feel that there are no risks to consumers, because till date I have never heard about any ancient about bitcoin. In my opinion it is the most secure and reliable crypto digital currency in the world, although there are many other cryptocurrency prevail in the community too.

So I think people can trust and comfortably consume their bitcoin anywhere in the world without any fear and risk.

I know that this is not answering your question at all, but if you don't mind I would like to just express my opinion that the question itself is wrong.
Wrong as it made a claim that Bitcoin has to be regulated. I simply don't see why that would have to be the case. Bitcoin was built to be hard to regulate.

All of those risks in using Bitcoin should be on the user himself. In case of a robbery the criminal should be prosecuted for the way he obtained them, like threatening or use of other persons property without his permission. Things that should be illegal when it comes to Bitcoin, already are. I don't see many people complaining in Bitcoin world how we need to get the police involved in the currency itself.

When it comes to fraud (false advertisement), that is supposed to be illegal on it's own, either you bought it with bitcoins,cash or peanuts.

Instead of regulating efforts, I would say there must be some mechanism to keep it in a right flow. I am reading news on the second tab and a company named Futurebit (established in Malasia) appointed some agents through facebook to bring investors for their company and they claimed 1.5% interest on a daily basis on Bitcoin deposits.

Agents from my country worked in a good faith (and got themselves in trouble because not doing any research before working for such company). Now as expected, the company didn't pay returns as promised and now legally domestic agents are responsible for the loss of the investors.

I know agents and investors are equally responsible for this incident but unfortunately, since accused include the international entity, it is difficult for legal authorities to proceed further in this fraud case.

I am not sure how can law prevent such cases from happening again but I think we need some planned efforts in this area. We need some efforts in building awareness among masses.

Seen an interview with a local buisnessman. He said that that  the current legal basis is enough to accept payments in bitcoin. The only accounting issue was that cryptocurrencies should be listed as assets. In some countries it is listed as short term investment. I know that it is not perfect but it works

Fraud and anonymity is indeed something to look into. Since most of the time the sender and the received are hidden only under a bitcoin address and there is no way to trace them by just using the address. It is possible, but it takes a lot of detective work to find the true identities of the owner of the address.

Fees are indeed becoming a problem. This is highly apparent when it comes to transacting small amounts. Sometimes the fees even exceed the price of the purchased item or service. However it is looking like the network is freeing up and fees are also going down. I just hope the segwit upgrade would be a permanent solution for the long term. This could be an argument but really it might be a technical problem.

Note: Your English is fine. Don't worry about it.

I think the first biggest problem is a fraud. As we know that bitcoin is anonymous, so it's very easy to cheat people in various ways (cheating prices, scams, etc.)
The second is very expensive transaction fee. As an example : if i want to buy a products with bitcoin, i must pay some fees and also taxes to be imposed (if applicable); so here consumers are harmed.
Sorry for my english.

Getting hacked is not the problem, since it is your responsibility to protect what is yours. This is similar to having fiat money. Will you put your dollar bills on a table in a public restaurant and leave it unattended? Of course what you will do is put your money in your wallet and go wherever you need to go. The legal issue for hacked funds is how will the government control hacked funds, ie retrieve it from the hacker or the person who was paid using it.

Tax is inevitable. Everything can be taxed especially if your profited from it.

i guess the only problem about this is the fact that we consumers can be hacked or this bitcoins are tax free, the law could give it a tax but, i think they don't have much point cause it is a virtual money, but somehow we can convert it to real money. this makes it a problem to other people that are doing their best to do their job in the real life or with the courses and professions. but it could makes us and help us earn some money to have a future life, so its not a much of a problem except from hackers and law.

First off, thank you for your valuable insights, I hope to see more of you on this thread for purposes of academic discussion. From my initial reading of your answer, seems like you are adept in the legal profession seems like you are lawyer or law student (like myself) or someone indeed in the legal field.

---

Bitcoin debit cards are just ingeneous compromises people have done so that bitcoin can be used in the current financial system. What actually happens there is that bitcoins are converted into fiat and ultimately used to pay for stuff. Also remember that these are all still under a financial institution like banks. Not to mention all bitcoin debit cards are either Visa or Mastercard, both of which can be classified as dealing only with fiat and a centralized agency.

Remittance is possible, but the receiver will likely need to convert it to fiat to be able to use it in today's economy and financial system.

Payments are possible but is very limited. There are only a few that directly accepts bitcoins as payments.

As an element of the financial system, would still be far fetch right now since it has not yet been massively adopted.

---

Good take on the legal aspect of bitcoin for taxation purposes. However, this goes beyond the scope of my topic and this topic as well. Generally, this does not affect consumers in a dangerous way since taxes are innate in all civilized societies or societies with a government.

---

Plausible argument, however, I think this will still be classified as theft and that the bitcoins obtained through such methods are illegally obtained. I believe to constitute ownership of anything is that you actually owned it. Owning means that you created it, acquired it through legal means (purchased, received as payment, donation, successions, and other ways of acquiring ownership under the law). In this case what happened is something like the thief hacked into the online banking account of the victim and stole what is in it.

---

Just for the sake of everybody else that is not adept in the terminologies of the law, "fungible" means that the goods an be mixed with other goods that are exactly similar in quality. Take for example Jasmine rice, it can be mixed with other Jasmine rice, and everybody who owns it can just claim how much he owns of the stockpile.

I would say this is indeed a possible problem not for the immediate parties to the theft of bitcoins, ie the owner and the hacker, but it is a possible threat to the third parties that will receive the stolen bitcoins.

As an illustration:
1. Say B hacked A's bitcoin wallet.
2. B pays C, with the stolen bitcoin.

Can any government compel C to return the stolen bitcoins? Not sure if we can apply negotiable instruments law here (can't say it is the same for all countries though).

3. continuation from about illustration. C pays D and D pays E.

Can any government compel E to return the stolen bitcoins?

From the illustration, I think there is a grey area now. Since there is no law that says that you need to verify that the person sending you bitcoins have legal rights over the bitcoins he is sending. In the case he sends you illegally obtained bitcoins then how can investigators know that you are not part of the crime or you are not the criminal himself who stole the bitcoins? If you are not the criminal but just merely a victim as well because you received illegally obtained bitcoins then can you invoke that you obtained the said bitcoins for value?

Note: This is really a good argument you have put out and this will likely go into my research.

---

I've thought about this initially and wrote it on my paper. For illustrative purposes, for example, B, the buyer, sent $100 worth of bitcoins today or 0.02BTC to buy a Trezor from S, the seller. After a few days of using it, B realized that there is a hidden defect in the item, however both B and S only came to an agreement that S will refund B after three months. By that time, prices have already gone up by double the price when B bought the Trezor. The question will be, should S return $100 worth of bitcoins or should he return 0.02BTC which was the amount B sent?

---

I would not like to discuss forks in the paper as it will further complicate things in a technical level. Generally I am writing only on bitcoins as most cryptocurrencies are quite different than bitcoins, well a whole lot of them are so different in terms of usage, functionality and overal their code.

This doesn't make much sense. Bitcoin could replace/become alternative to fiat money, not to the things you've listed. You can have bitcoin debit card, you can use Bitcoin for remittance, payments and have Bitcoin as an element of the financial system.

Anyhow:


The very first thing for the government to regulate is to decide how to treat Bitcoin for the tax purpose. The easiest way is to pull it under definition of either asset/commodity or foreign currency (i.e. is bitcoin mining or trading subject to income tax and/or VAT etc).

There's whole bunch of things that would need to be clarified for the mainstream commercial usage to go smooth. Issues that comes to mind:

- You'd need to define very basic stuff like who owns bitcoins - is owning/knowing private key enough to constitute bitcoin owner? i.e. if you guess someone's brainwallet passphrase - can you legally keep bitcoin, or is it illegal?

- Is Bitcoin fungible by law? Say if hacker steals BTC from the exchange and then use it (fully or partially) to buy something from you - will you get to keep BTC, or will it be seized from you?

- How to deal with the refunds? If I buy faulty item for $20 worth of BTC and want to return it a week later, do I have a right to demand refund in BTC even if it's now worth $30? Does the merchant get to decide whether he refunds me in fiat or BTC?

And finally:

- What is "Bitcoin"? Who gets to decide it? What happens when the network splits in 2 (or 3, 4 etc...) and all the sides decide to keep the name, so now you have multiple chains called "Bitcoin". Which one is the "real" one, if any? Can I create my own fork and sell coins as "bitcoins", if not - why? Who owns the name. This one is particularly difficult to regulate, as the law would need to define clear and measurable set of rules (i.e. law cannot just state that "majority of users decide what Bitcoin is", it would need to define both: who the "user" is and how to measure users' support etc).

Also, no government will "regulate Bitcoin", they would "regulate cryptocurrency". So regulators have to take into account all the different coins/tokens, which can have significant differences (different algos, some may not have blockchain, different anonymity levels, some tokens could be paying dividends etc).

⚠ LOCAL RULE ⚠: No signature spammers will be tolerated. I will delete spam that will ensue. I have the right to decide which are spam and not. The purpose of this thread is for academic purpose and not for anything else.

---

I am writing a Legal and Business thesis paper about bitcoin and how it can be used by the public secured by a legal framework. I am stumped on my legal issue for my topic. So I'd like to ask the community for a bit of help.

A little background. In the Philippines there is no regulator framework that guides the use of bitcoins. What we have is just plainly a regulation issued by a government agency that is saying that Digital Currency exchanges should be registered with the Central Bank of the Philippines for purposes of checking for money laundering and anti-terrorist financing. There is no mention about anything that will involve the use of bitcoins in commercial activities.

In my paper, I would like to push for or convince regulators that we could implement bitcoins as something that could replace credit cards, debit cards, money remittances, payments, and all other financial systems. Not really replace though, but probably give the people a clear alternative. However, the legal issue is that since there is no legal framework, in case it will be used for commercial activities the buyer and sellers are not protected as there is no clear procedures to how they can be protected by law.

So that assumptions are,
A. Yes there is no legal framework for bitcoins to be used for commercial activities
B. Yes it must be regulated

My question is,

Since there is no legal framework and it must be regulated, so what?
What are the the consumer risks that poses a problem in the use of bitcoins in commercial activities that the law should address?


It would be better if you have sources to back up your answers. Looking forward to all of your responses. If you guys have any suggestions, feel free to post it.