Crypto Against

Disadvantages
1. Blockchain technology is still relatively new

Blockchain’s cryptographic nature—as well as the decentralized peer-to-peer network
that validates transactions—provide some inherent security features. For example, the use
of encryption with hashes and timestamps makes it virtually impossible to alter the data
in a block once it’s been added to the blockchain.
But decentralized blockchain technology is still relatively new, and we’re still figuring
out how to best use and regulate it. In the meantime, some criminals have been able to
take advantage of the anonymity offered by crypto to scam users, who may have little
recourse to reclaim their assets.
2. Cryptocurrency is an extremely volatile investment

Cryptos tend to be unstable investments, so don’t be surprised to see their value go up or
down by very significant amounts. In fact, they’ve been known to rise and fall by double-
digit percentages within the span of hours. Past performance isn’t a good indicator of
future performance when it comes to any risky investment—and that certainly includes
cryptos. All this said, you shouldn’t invest more than you can afford to lose.
3. Cryptocurrency scams are a growing concern

Unfortunately, the world of cryptocurrency is awash with scams. Criminals may use fake
apps, crypto wallets, and emails to lure you into giving up your private keys, giving them
access to your crypto assets. NFT scams are also increasingly common, with some buyers
being duped by fake accounts with fake names, or promised royalties that never
materialize.
Cryptos themselves can also be quite scammy in nature. This was the case with the Squid
Game token, which had a built-in mechanism that prevented many holders from reselling
their tokens.
4. Cryptocurrencies are still largely unregulated

Despite some moves around the world to regulate cryptocurrencies, they remain less
regulated than many other asset classes. If a platform that exchanges or holds your crypto
assets goes bankrupt, there’s a risk you could lose all your capital. Similarly, your assets
could be at risk if an exchange holding your crypto is hacked by criminals.
In addition, cryptocurrency taxation is in its infancy, and future changes could have
ramifications for your investments.
5. Diversity is key
There are thousands of cryptocurrencies, and many of them are still in the earlier stages
of development. It’s still difficult to tell the ultimate winners from the losers.
As with risky investments in general, it’s never a great idea to put all your eggs in one
basket. If you choose to invest in cryptocurrency, it could be better to spread your
investment across a variety of different cryptos.
Highly Unpredictable Value: Virtual currencies are easy to create and spread in the
market quickly. Their underlying value is highly subjective and unpredictable. As a
result, prices can swing wildly upward and crash without warning or any change in the
real economy.
Difficult to Cash Out Investments: Virtual currencies are not traded on traditional
exchanges by established financial institutions. If you purchase one of these virtual
currencies, you might not be able to find a buyer for it when you want to sell.
Conflicts of Interest: Many operators of virtual currency trading platforms are

themselves heavily invested in virtual currencies, and trade on their own platforms
without oversight. The financial interests of these operators may conflict with your
interests.
Increased Risk of Market Manipulation: Many virtual currency trading platforms have
few, if any, rules about insider trading or other protections available to traders on
traditional stock exchanges. In addition, many trading platform operators are not
appropriately monitoring for market manipulation or other harmful trading activity.
Limited Protection from Fraud: There are no central or comprehensively-regulated

exchanges, like the New York Stock Exchange or Nasdaq, for virtual currencies. Virtual
currency trading platforms operate from various places around the world, many of which
are inaccessible to American law enforcement. Most platforms are subject to little or no
oversight. If you are the victim of fraud, you may have no recourse in the United States.
RBI cautions users of Virtual Currencies against Risks
 VCs being in digital form are stored in digital/electronic media that are called
electronic wallets. Therefore, they are prone to losses arising out of hacking, loss
of password, compromise of access credentials, malware attack etc. Since they are
not created by or traded through any authorised central registry or agency, the loss
of the e-wallet could result in the permanent loss of the VCs held in them.
 Payments by VCs, such as Bitcoins, take place on a peer-to-peer basis without an
authorised central agency which regulates such payments. As such, there is no
established framework for recourse to customer problems / disputes / charge backs
etc.
 There is no underlying or backing of any asset for VCs. As such, their value seems
to be a matter of speculation. Huge volatility in the value of VCs has been noticed
in the recent past. Thus, the users are exposed to potential losses on account of
such volatility in value.
 It is reported that VCs, such as Bitcoins, are being traded on exchange platforms
set up in various jurisdictions whose legal status is also unclear. Hence, the traders
of VCs on such platforms are exposed to legal as well as financial risks.
 There have been several media reports of the usage of VCs, including Bitcoins, for
illicit and illegal activities in several jurisdictions. The absence of information of
counterparties in such peer-to-peer anonymous/ pseudonymous systems could
subject the users to unintentional breaches of anti-money laundering and
combating the financing of terrorism (AML/CFT) laws.

Crypto Against

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Crypto Against

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Disadvantages

1. Blockchain technology is still relatively new

2. Cryptocurrency is an extremely volatile investment

3. Cryptocurrency scams are a growing concern

4. Cryptocurrencies are still largely unregulated

Conflicts of Interest: Many operators of virtual currency trading platforms are

Limited Protection from Fraud: There are no central or comprehensively-regulated

RBI cautions users of Virtual Currencies against Risks

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