In comparison to the age of the traditional financial system of a centralized currency, Cryptocurrency is a relatively new concept understood properly by only a few. Thus, it naturally follows that as of now it faces numerous legal, economic and security issues. The address of these issues is key to the maintenance of the most essential element in any currency – that of trust.
Some of these challenges are as follows
Regulatory Framework: One of the key properties of cryptocurrencies existing today is that they are decentralized and hence have no central bank backing the value of the monetary units. As the bonus bitcoin concept is relatively new, most countries lack a legal framework to regulate the value and flow of cryptocurrencies. In this scenario, countries like Russia and Bangladesh have declared certain cryptocurrencies as illegal.
Volatility: Currently, most of the trading of cryptocurrencies in the market is based on speculation rather than merit. This makes cryptocurrencies highly volatile, driving away investors void of a high-risk appetite, and at the same time, promoting cryptocurrencies as a virtual asset rather than a currency.
Illegal Activities: Since cryptocurrencies work on blockchain technology, all transactions are pseudo-anonymous and as such untraceable. This leads to its usage for various unethical and illegal purposes, including tax evasion and money laundering.
Cryptocurrencies have also, since their launch, become the standard of payments on the dark web. Bitcoin has been coded to have only a limited supply, and the creation of bitcoins is expected to come to an end by 2140.