Discussion Points: Cryptocurrency
What is cryptocurrency?
Cryptocurrency is digital currency, which exists entirely online. If you’ve heard the word but don’t know exactly what it means, this blog post is for you! Whether cryptocurrency is just a temporary trend or becomes an enduring new way to conduct business, cryptocurrency is both new and exciting as well as unpredictable and risky.
New and Exciting
Cryptocurrency is intentionally decentralized, allowing two parties to transact without involving a third party. In this way, it is like a cash transaction rather than a check or credit card transaction that involves a bank or credit card company. One thing to note is that although there may be an expectation of complete anonymity for a cryptocurrency transaction, there is actually a digital record of every cryptocurrency transaction. Most cryptocurrencies use a “block chain” or distributed ledger to record transactions. So even though a transaction is made with a pseudonym and the data is encrypted and stored across a global network, the data may be traceable with effort.
Unpredictable and Risky
The news headlines have probably alerted you to the facts that cryptocurrency is highly volatile, lacks safeguards, and is soften subject to cams. If you’re still interested in investing in this novelty, be sure to proceed with caution.
With its value closely connected to supply and demand, cryptocurrency is relatively easy to influence. For example, one post by a prominent influencer can affect the value of cryptocurrency. Or a major buy or sell by a significant crypto investor can trigger a mad rush to purchase or a major sell off. Anything that inspires a sudden change in supply or demand can significantly and virtually immediately impact the value of a cryptocurrency. The result can be a life-changing windfall or loss.
Unlike traditional United States currency, cryptocurrency is not backed by the government. Whereas an FDIC-insured savings account is protected if the bank fails, cryptocurrency offers no such protection. If a transaction fails, the government has no obligation to step in on your behalf. Further, if you lose your login credentials or you mis-direct a transfer, there is no remedy available. The cryptocurrency in your inaccessible account or the cryptocurrency you’ve mis-directed is lost. For these reasons and more, it’s essential to learn as much as possible about this new class of asset and how to safely manage it if you’re thinking of investing.
Beyond learning about cryptocurrency, an investor must get and stay familiar with how scammers operate in this digital landscape. Due to its digital-only existence and its novelty, cryptocurrency creates a favorable environment for scammers to operate in. Further, rules and regulations for consumer protection are not quite keeping up with this expanding trend. One informative resource is What to Know about Cryptocurrency and Scams from the Federal Trade Commission.
Meet with an experienced Florida Estate Planning Attorney
Whether you choose to invest in cryptocurrency or not, it’s important to entrust your estate planning goals to an experienced attorney who keeps up with emerging financial trends. Call 941-914-9145 to fill out our contact form and we will be in touch to schedule a meeting.