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ALRAQABA . ISSUE 15
money laundering, terrorist financing, drug
dealing, or tax evasion practices. This may
be attributed to the fact that the transactions
of cryptocurrencies are hard to trace, and
the traders have the chance to transfer
funds anonymously. All those factors further
complicate the management and regulation
of cryptocurrency transactions and would,
therefore, impede verification of the performed
transactions.
4. Cryptocurrencies are virtual and intangible
assets,
and therefore are hard to trace.
5. Hacking and security threats.
Online
accounts and cryptocurrency exchange
platforms are susceptible to hacking and
security breaches. Such threats include
fraud activities, in which data stored on the
online accounts, software, or hard disks are
manipulated and illicitly modified. Besides,
a hacker may decrypt and access data of a
cryptocurrency in order to be utilized for illegal
or illicit purposes. For instance, NiceHash, a
cryptocurrency mining platform, was hacked,
and more than $70 million worth of bitcoins were
stolen from the platform.
6. Weak protection of traders.
Given that
cryptocurrencies are not subject to the control
of a central bank or any regulatory entity,
trading of such types of currencies is believed
to be risky. As federal control is absent in
cryptocurrency activities, there is a chance
that traders would lose their money and any
underlying rights.
7. Irreversible transactions
. In case of a
mistake in transferring cryptocurrencies to
a digital wallet, the transaction cannot be
reversed.
(3) Economic impact of cryptocurrencies
:
The main challenging risk in using
cryptocurrencies is that they are incredibly
volatile. Despite their rapidly rising value,
cryptocurrencies are still believed to be a risky
investment tool.
The year 2013 marked a swift increase in the
prices of cryptocurrencies, which was followed
by an equally rapid deceleration in the prices.
The value of cryptocurrencies has undergone
several rallies and crashes since then. It was
not until 2017 that digital currencies managed
to recover and hit their peak once again.
All those rapid changes made the economists
consider digital currencies a severe threat to
the existing and future economy. This particular
problem would be discussed under two
considerations:
1. The concern for excessive upward
investment and the maximum investment limit:
Digital currencies are undergoing massive
price rises due to the high demand by investors
who are striving to invest in cryptocurrencies
to earn high profits. This remarkable increase
will not last forever. It is inevitable that at
some point, digital currencies will reach their
highest limit of investment when all demands
for cryptocurrencies are met, and there are no
demands by new investors. Those factors will
result in settling the prices of cryptocurrencies
for a while.
Upon settlement of prices, investors would
simply decide to start selling. The dramatic
increase in supply will lead to crashing the
prices and eventually driving many other
investors to instantly sell at a lower price out
of concern that they would lose more. This
continuous escalation in selling by investors
at one time would lead to crashing the prices
Research
