The cryptocurrency is a decentralized, virtually anonymous, substantially unregulated digital currency that has become exponentially popular in the recent years. The cryptocurrency is promoted by nongovernment persons or entities using peer private network, operating on the basis of decentralized autonomy. The anonymous nature of cryptocurrency transactions makes them well suited for a multitude of despicable activities such as the unauthorized transactions to save identity of the transactors, illegal transactions, money laundering, and tax evasion. The governmentt are becoming alarmed and they are more focused over such transactions.
One of the cryptocurrencies which is called “Bitcoin” is open-source and their transactions require no third-party intermediary. The buyer and seller interact directly, and no personal information is transferred from one to the other. but However, unlike a fully anonymous transaction, there is a transaction record. A fulll transaction record of every Bitcoin and every Bitcoin user's encrypted identity is maintained on the public ledger. For this reason, Bitcoin transactions are thought to be pseudonymous, not anonymous.
Cryptocurrencies are legal in few countries but not in many countries. It remains uncertain when the government will take over any perceived legal shield. We categorically used the word perceived shield, because in many countries, cryptocurrency is not expressly declared illegal, but it does not mean cryptocurrency becomes legal thereby. With this context, cryptocurrency has raised several new complicated legal, social, economic, and administrative issues.
Many private decentralized trust or corporate networks support alternative currencies like cryptocurrency; branded currencies, for example, “obligation-based” stores of value like quasi-regulated Bartercard; loyalty points or game credits that are based on reputation of commercial products; and highly regulated asset-backed “alternative currencies” such as mobile-money schemes like "MPesa" which is called e-money issuance by a telecom company in India. These all are alternative of currencies.
The rising popularity of cryptocurrencies is due to the convenience to generate or manufacture, store, handle, manage, and account cryptocurrencies and transact them; get shield from discovery by government authorities for taxation or, otherwise, to carry illegal transactions; and so forth. The promoters require no material resources to produce cryptocurrency, as it is generated through computer programs, stored on computers, and transacted through the Internet. Promoters require no license or gold in their treasury to generate cryptocurrency unlike governments and central banks that require certain security, assets, and procedure to follow when uncertain how much currency the government can print. Cryptocurrency is designed to operate without any sovereign regulation.
The above-described characteristics of cryptocurrency become the core cause of legal problem that one can face. The legal problem may range from being sued by the government for involvement in the transaction that has no legal validity as currency to availing justice in case one becomes a victim of fraud by other participating peers or promoters. The transactions of cryptocurrency occur in the absence of government, bank, authorized dealer, payment network, or regulator. As all transactions are on the Internet, users interact with each other directly, without any license, anonymously, and without third-party interventions. In the absence of legal evidences, the victim may not be supported by court.
And as of September 2012, Bitfloor, a Bitcoin exchange, was reported to be hacked, with 24,000 Bitcoins stolen. After then, Bitfloor temporarily suspended operations. In April 2013, Instawallet, a web-based wallet provider, was hacked, resulting in the theft of over 35,000 Bitcoins. With a price of 129.90 USD per Bitcoin at the time, or nearly 4.6 million USD in total, Instawallet suspended operations. In August 2013, the Bitcoin Foundation announced that a bug in the software within the Android operating system had been exploited to steal from users' wallets. In October 2013, a Bitcoin bank, operated from Australia but stored on servers in the United States, was hacked, with a loss of 4100 Bitcoins.
The largest obstacle for regulators is that Bitcoin was built not to be regulated. Unlike the centralized US dollar system, where the government has a monopoly control on the production of money and doles it out to licensed banks, the Bitcoin universe is decentralized by design. They're produced by random players around the world. They're transferred seamlessly via nameless digital wallet
Cryptocurrencies are defined as decentralized convertible virtual currencies. They are decentralized, in the sense that they are issued without a central administering authority. Significantly, the underlying protocols on which most cryptocurrencies are based do not require or provide user identification and verification. Also, the historical transaction records generated on the blockchain are not necessarily associated with an individual's identity.
Cryptocurrencies are also–by definition–convertible virtual currencies, as they can be exchanged for fiat currency such as pounds, dollars and euros, and this facilitates their use for settling commercial transactions. They are a recent phenomenon, and Bitcoin was the first to gain international reputation as a digital currency that could be used to settle transactions after it was anonymously created in early 2009. Amongst other things, it is believed that they have the potential to facilitate financial inclusion, as they require no central administrating body to coordinate their use and parties that use them can make payments directly on the blockchain on a peer-to-peer basis. By by-passing the sometimes stringent requirements for accessing the formal financial sector and opening a bank account, they can facilitate financial inclusion and enable individuals excluded from the formal financial sector to transact nationally and internationally with parties willing to accept cryptocurrencies for goods and services sold. To that extent, they can facilitate financial inclusion in Africa. However, despite that cryptocurrencies can facilitate financial inclusion in Africa in this way, Salami argues that they raise significant regulatory issues – which are more accentuated in the African context – as they can also be used to facilitate crime, money laundering and terrorism financing.
