Since its creation in 2009, the virtual currency of bitcoin has been the subject of much scrutiny and analysis. It is a digital payment system or cryptocurrency which allows peer to peer payments of any value, at any time and anywhere in the world, without any reliance on banks and their internal security systems or control by the government.
Previously it has been associated with illegal activities as it allows payments to be made anonymously by-passing any form of anti-money laundering. Nevertheless bitcoin has recently reached an all time high price of $5,000, making it four times more valuable than gold. There are only 21 million bitcoin.
Now, Bitcoin can be used to purchase everything from pints and takeaways to flights and holidays. It’s also gradually appearing in the London property market. With sellers offering to accept payment in bitcoin and with its reduced transaction fees, it is arguable that it could become the preferred payment option for overseas suppliers seeking to reduce fees associated with paying in foreign currency.
It is important however for businesses to understand the potential risks if a customer or supplier asks for payment to be in bitcoin. These include its restricted use in certain jurisdictions as well as with large retailers, its loss of value if you lose the password or private keys needed to access the bitcoins and the risk of unknowingly getting involved in illegal activity. This is owing to its anonymous nature, as you have no way of identifying where the currency has come from and also its irreversibility if there is a problem with the transaction. In addition consumers must consider their lack of consumer credit protection.
Until the regulation of cryptocurrency is further explored in the UK by the Financial Conduct Authority, businesses and consumers continue to use bitcoin at their own risk and should consider undertaking their own due diligence on their bitcoin counterparts where possible.