How does Cryptocurrency work?
For many people, how Cryptocurrency works is a bit of a mystery. Luckily, it isn’t that complicated to understand. Transactions are sent between people using software known as cryptocurrency wallets. The person creating the transaction uses said wallet to transfer currency from one account to another. To transfer funds, a password associated with the account is necessary.
Transactions made between people are encrypted (hence “crypto) and then broadcast to the cryptocurrency’s network and added to the public ledger. Transactions are then recorded through a process known as “mining”. All users of a certain cryptocurrency have access to the ledger if they choose to access it. The transaction amounts are public, but the transaction itself is encrypted. Each transaction then leads back to a unique set of keys. Whoever owns a set of keys, owns the amount of cryptocurrency associated with those keys (basically like whoever owns a bank account owns the money contained).
Numerous transactions are added to a ledger simultaneously. These “blocks” of transactions are added in order by miners. This is the reason why the ledger and the technology behind it are called a “block chain”. It is a “chain” of “blocks” of transactions. Some other blockchain companies use unique systems. For example, some coins offer completely private transactions and some don’t use the blockchain system at all.
If you wish to speak with one of our experienced Palm Beach County lawyers at Barbuto & Johansson, P.A., we are available to answer your questions regarding Cryptocurrency please contact us at 561-444-7980.
UNITED STATES CRYPTOCURRENCY LAW
The United States has taken a mostly non-interventionist approach to the crypto sphere. In June 2018, US Representative Warren Davidson (R-OH) spoke publicly on the neccessity for more regulation in the industry. He said that without “regulatory certainty” the market can’t reach its optimal stage of development. Additionally, he took a moment to express how the regulatory framework should be flexible enough to be careful not to suppress growth in the cryptocurrency sector.
Although there are a rising number of the public on both sides of the crypto aisle, US regulators are still evaluating their choices. Further complicating the debate is the fact that more states are getting used to the concept of cryptocurrencies. Recently, Ohio became the first state to accept tax payments in Bitcoin. Additionally, Wyoming passed legislation to formally recognize cryptocurrency as actual currency.
The growing approval of Bitcoin by local governments, coupled with the aspiration to be at the forefront in blockchain, has put US lawmakers in a particularly delicate position. Currently, the SEC has started to get tough on ICOs (Initial Coin Offering), which they proclaim are actually securities. The SEC even released an ICO guide to enable companies to determine if they are hosting an ICO or an STO. The latter choice requiring rigid security law compliance.
CRYPTO CLASS ACTIONS
Given the wide variation in the cost of cryptocurrencies and the recent sudden drop, the fact that many people paid for tokens of blockchain based start-ups, we have only likely started to observe the beginning of class action lawsuits filed relating to blockchain-related companies or companies that were involved in ICOs. Considering that anyone with an idea for an undertaking can obtain financial backing without dealing with the formalities of an IPO, there are apparent chances for the public to be deceived, leading to possible lawsuits.
It seems highly probable that other issuers of tokens will face class action lawsuits. Any company planning to undertake a token offering using an ICO should proceed with utmost prudence. In the same manner, individuals looking to invest in a token offering should be completely certain that the offering is carried out in compliance with relevant state and federal laws.
For questions regarding Cryptocurrency or to learn more about how it may impact your business, please contact one of our attorneys. Call the firm today at (561) 444-7980.