Bitcoin Risks, Rewards and Regulation

Chris Rowland

Cryptocurrencies grew significantly in 2017 in terms of value and volume of transactions. Within the cryptocurrency market, Bitcoin dominates with over a 40 percent market share. The price of Bitcoin has increased over 1,300 percent in 2017 alone. The Bitcoin expansion also resulted in a significant increase in risk, fraud and regulatory issues.

The Bitcoin growth has outpaced the regulatory oversight. Regulators have struggled to keep pace with the speed of growth and utilization of digital currencies. On a global basis, the regulatory framework is fragmented and evolving, with a limited coordination and consistency. Bitcoin presents regulatory challenges in both anti-money laundering and sanctions controls due to the anonymity issues associated with the product.

The Bitcoin product should be considered high risk. As Bitcoin dramatically increased in value, so did successful hacking events. In many of the hacking events, there were fraud and money laundering, which resulted in fines and arrests. Bitcoin provides alternative means to avoid economic sanctions. Sanctions appear to have played a role in the recent hacking of South Korean exchanges.

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