What are the risks of investing in Crypto and what countries do

Bitcoin also involves risks, including: absence of forms of protection or guarantees of the sums deposited, loss of the key to access the system and high volatility

by Lorenzo Ciotti
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What are the risks of investing in Crypto and what countries do

Bitcoin also involves risks, including: absence of forms of protection or guarantees of the sums deposited, loss of the key to access the system and high volatility. In the abstract, four regulatory models are possible with regard to crypto-assets.

Ignore the phenomenon. Apply the same rules that apply to similar financial services. Invent new rules and ban them. Both Bitcoin and other crypto-assets, on the other hand such as cash, can be used for illegal activities: to counter them, many advanced countries have introduced ad hoc measures.

The decision to ban crypto-assets clashes with the principles of companies that define themselves as liberal. The supervisory authorities have warned of the risks involved: every citizen should only invest in Bitcoin sums that he can afford to lose.

The private investor can make use of systems capable of protecting the investment through financial simulation software capable of highlighting the risk that this highly speculative instrument may contribute to one's personal assets.

What are the risks of investing in Crypto and what countries do

The Swiss financial authority, FINMA, has established the principle that cryptocurrencies that claim to incorporate rights of the holders and duties of the issuer should be regulated accordingly.

However, most cryptocurrencies do not create any obligations for the issuer, they do not commit it in any way. Those who issue them on the market could also run away with the cash. Whoever buys them does not make an investment, but a speculation.

Behind an investment there is always a productive activity, while a speculation is supported solely by the expectation of earnings. As with any investment, any real success ultimately depends on the prevalence of productive enterprise over sterile speculation.

And it is difficult to imagine this happening without adequate regulation capable of curbing gambling and encouraging entrepreneurial spirit. Instead, the widespread idea among many proponents of cryptocurrencies is that the competition between a multiplicity of digital currencies will take care of bringing out those most capable of ensuring their users a reasonably constant purchasing power.

Stability is seen as a desired and possible outcome of monetary competition, according to the thesis advocated by Von Hayek, in particular in the essay on the Denationalization of Currency. However, there are at least two good reasons to believe that the competition between cryptocurrencies does not lead to their stabilization at all.

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