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Welcome to our August 2017 Newsletter! Please take the time to read the article and contact us should you have any questions or concerns.

 

Law Offices of Salar Atrizadeh

Buying into Bitcoins

Our readers know that we have published articles about Bitcoin before, but many things have happened in recent times. This digital currency has soared in value this year. Bitcoin, as a system, while still presenting a high value, has actually resulted in a spike in trades due to its tendency towards gaining value. As such, it may seem to be like a good investment, right? Why wouldn't someone want Bitcoins or other cryptocurrencies? Is there any sort of drawback to investment? Unfortunately, there may be risks. Despite Bitcoin's rising popularity, aiming to accept it for businesses, or remitting it for payment still present important issues for entrepreneurs.

Bitcoin, as a system, relies extensively on the economic principal of supply and demand. There is only a set amount for its production and the process of creating (i.e., mining) it is limited and reduced over time. While it is feasible for someone to get them for a marginal cost­-just the electricity and an upfront payment for a good device capable of mining-it is not necessarily the easiest method. Instead, an individual can set up a bitcoin wallet, complete with a special address. This can then allow a person to receive and send Bitcoins, as they are accounted for in a public ledger.

Now, if someone was to buy into Bitcoin, or accept it, then he or she would presumably be able to enjoy its financial appreciation. Hence, it may grow in value, which means the recipient may receive a higher value than he/she otherwise would have earned under normal circumstances. This makes future values difficult to predict. In the case of online stores, this would mean a different return policy would have to be worked out. Instead of returning the amount paid, or an equivalent value, some online retailers are opting to merely offering an equivalent of the value in the form of in-store credit. This would lock in the "compensation" for whatever the individual was attempting to purchase.

However, this isn't the only downside to investment. As has recently been reported, Bitcoin is quickly earning the skepticism of major governments, as well as certain major players. For example, currency trading in Bitcoin had been prohibited within the Chinese exchanges. In addition, some in JPMorgan have pointed out their unwillingness to invest due to concerns about the lack of government backing. Because Bitcoin is effectively unregulated and not backed up by governments, there is a concern that it may have no real value. This is due to the idea that if other countries follow China's footsteps, then any investment in Bitcoin may become impractical.

At our law firm, we guide clients in legal matters involving business, technology, and e-commerce by using our knowledge and skills to create innovative solutions. You may contact us today to set up a confidential consultation.