The concept of cryptocurrency is difficult for some people to wrap their heads around. This new form of digital currency is completely separate from the economy, which means that it is invulnerable to inflation and market crashes that affect regular legal tender. However, that does not make it perfect.
There are some downsides to using cryptocurrency, but these are often exaggerated or misunderstood. When dealing with digital currency, the only real worry is that its value fluctuates based on stock prices, but those who know how to trade in the stuff can manage this aspect just fine. So, what are the most common concerns that surround cryptocurrency, and are any of them true?
It seems that security is always the first concern that most people question when it comes to something new, and for a good reason. It is better to be cautious when dealing with anything financial, and newer technology has made it easier for hackers to get a hold of online property.
Concerns about cryptocurrency fraud were justified a few years ago when the idea was new. However, the distributors have made bitcoin fraud almost impossible with the introduction of the blockchain. This process imbues every bit of cryptocurrency with a digital code to track and trace every transaction. Therefore, any fraudulent activity can be spotted and stopped immediately. This means that cryptocurrency fraud does exist; however, it is no more prevalent than with regular currency and there are things in place to tackle it.
Another valid question that people raise when it comes to cryptocurrency is when will Bitcoin run out? It is easy to see why people would raise this concern. Your understanding of financial transactions is based on the legal tender of your country, the value of which is tied to gold. This means that there is only a finite amount to go around. Cryptocurrency is a bit different.
Diligent users mine each piece of this digital currency to put more back into the market. It takes these professionals about ten minutes to mine one piece of Bitcoin, and it requires a special piece of software to do so. Therefore, so long as there are people mining away then Bitcoin will never run out. That is as long as it remains a valuable piece of currency.
It Is Tax-Free
Believing that you do not have to pay tax on cryptocurrency is an easy misconception to make. It is not money in the traditional sense, therefore it does not count as a taxable source of income. While there is some truth to this statement, there are still tax laws surrounding crypto that everyone should be made aware of.
The tax laws for cryptocurrency will differ from country to country; however, it is still taxed nonetheless. For example, the US government considers bitcoin to be property, rather than currency and it is taxed as such. Anytime a transaction is made with cryptocurrency and the user gains a profit it is taxed as per the tax laws of that nation.
It Isn’t Legal Tender
One of the main reasons people invest in cryptocurrency is to protect themselves from changes to the current economic climate. Crypto is immune to inflation, which means many users wish to make purchases with it. But is this possible?
Yes. It is perfectly legal to exchange crypto for goods and services so long as the recipient agrees to the transaction. Of course, the recipient must have a crypto wallet to receive payment, and most crypto transactions take place online. However, it is becoming more commonplace to see people paying with crypto in high street stores.
It Is A Global Phenomenon
A cryptocurrency is a legal form of digital currency that can be transferred across the online space and is not tied to one country’s economy. Therefore, many people believe that you can trade it freely between countries as a type of universal currency. As nice as this idea would be in principle it is not how it works in practice.
As mentioned before, every country has its own laws regarding cryptocurrency which makes these transactions a little more challenging. Some countries will tax bitcoin differently, while others have banned it completely, like China. This means that you will have to be extra careful when trading cryptocurrency abroad. Try to learn about the bitcoin laws of all the big markets before you go ahead and trade. Cryptocurrency is a popular phenomenon, but it is not as widespread as you may think.
This article should clear up away any misconceptions that you had about cryptocurrency. You should have these common concerns, and you can now see where they came from. You will always find helpful information about cryptocurrency if you look for it, so be careful, and you should find that most of these concerns are unfounded.