There are five risks in the use of Bitcoin:
- The risk of Policy
Due to the “constant total amount” of Bitcoin, its circulation will be accompanied by the flow of goods and services, which has a small transmission effect on inflation. Adding the weight of Bitcoin to the world currency can weaken the transmission effect of monetary policy. Bitcoin's "decentralization" feature makes it impossible to regulate and manage Bitcoin.
When the world is still conducting political, cultural and economic exchanges with countries as a unit, the role played by the existence of Bitbi has great limitations and vulnerabilities.
The decentralized nature of Bitcoin may threaten the traditional monetary system, affect the government's macro-control capabilities and reduce fiscal revenue;
- The risk of the law
In August 2013, Germany announced the recognition of the legal status of Bitcoin and it has been included in the national regulatory system. Germany is the first country in the world to recognize the legal status of Bitcoin.
In May 2016, Japan approved the digital currency regulation bill for the first time and defined it as property.
On June 9, 2021, the El Salvadoran government passed a bill to make Bitcoin a legal tender here. From September 7th, it will become the country's legal tender. El Salvador will become the first country in the world to use Bitcoin as a legal tender.
At present, Bitcoin is only protected by the laws of various countries as a virtual commodity rather than a currency.
Only a few countries recognize this status of Bitcoin and do not support it as a major currency.
In cross-border Bitcoin infringement cases, because countries have different legislations on Bitcoin and have different characterizations of Bitcoin, the resolution of related disputes involving Bitcoin is relatively lagging.
- The risk of Speculation
Bitcoin does not have national credit or physical assets as protection, and the price may fluctuate sharply, which is extremely risky for investors. However, in my opinion, speculation is a high risk but also an opportunity, and it depends on the individual.
- The risk of Money laundering
Bitcoin has the characteristics of anonymity and freedom from geographical restrictions. The flow of funds is difficult to monitor, and it will be very easy to circumvent government supervision, making it easy for criminals to conceal the source and direction of their funds, which provides convenience for money laundering, terrorist financing and evasion of sanctions .
They buy other people’s bitcoins through the exchange platform, and then bring the bitcoins to other platforms or their own wallets. Through multiple transfers, the tracking path is difficult or directly impossible to trace, and then through overseas trading platforms or black markets or directly Commodities purchased overseas are exchanged for foreign currency to complete a series of acts such as money laundering.
Bitcoin still has shortcomings such as lack of credit guarantee, poor security performance, and easy to cause deflation. At the same time, it has to face the competition of various emerging altcoins, and there is a greater risk of substitution! Although I think this possibility is very small.
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