Bitcoin – a judicial pitfall?

Legal information on the financial topic number 1.

Right now, Bitcoin is probably the hottest topic in the world of finance and economics. The extraordinary growth of this cryptocurrency heralds a new era: There has never been before a virtual currency with such a high value. Entrepreneurs and anyone interested in Bitcoin should consider the current legal situation:

In Austria, Bitcoin does not qualify as a legally recognized currency and does not get controlled by the Financial Market Supervision (although the use of cryptocurrency in certain business fields can require a concessionary duty).

Advantages of Bitcoin are among others the so called pseudonymity (the user’s IP address is being veiled) and the transparency of the real time-transactions. Nevertheless, there are also various disadvantages of this cryptocurrency: There is no ensured legal protection of the transactions or in the case of the closing of a trading platform. The exchange rate is subject to strong fluctuations; therefore, the win or loss risk is extremely high. Due to the before mentioned pseudonymity there is a risk of illegal activities such as money laundering and also the virtual “money” can be stolen, for example during a hacker attack or if the personalized keys are being purloined.

On a European level, the inclusion of digital asset exchange platforms and wallet providers in the regulations for prevention of money laundering is being furthered. Since the field of cryptocurrencies is extremely complex, the consultation of a lawyer is highly recommended in any case.

Further information is available at the Austrian Economic Chambers and the Federal Minstry of Finance (both in German).