Pros and cons of crypto-assets
Produced in partnership with Puesan Lam and Tony Katz of DLA Piper LLP
Pros and cons of crypto-assets

The following Financial Services guidance note Produced in partnership with Puesan Lam and Tony Katz of DLA Piper LLP provides comprehensive and up to date legal information covering:

  • Pros and cons of crypto-assets
  • What are crypto-assets?
  • Pros of crypto-assets
  • Cons of crypto-assets
  • The future of crypto-assets and regulation

What are crypto-assets?

One of the hurdles in relation to understanding non-traditional currencies and assets lies in the inconsistent use of language. Regulators and tax authorities, as well as commentators, refer variously to digital currencies, virtual currencies, cryptocurrencies, crypto-assets and crypto tokens, and it is not always clear whether they are using the terms interchangeably or with the specific meaning of each in mind. For more information about how these terms are defined, see Practice Note: crypto-assets—essentials.

This Practice Note examines the pros and cons in using crypto-assets.

There are a number of advantages to using crypto-assets which undoubtedly account for their rapid increase in popularity. However, these advantages need to be balanced against the risks associated with the crypto-asset.

Pros of crypto-assets

Below are some of the advantages of crypto-assets (in particular crypto-assets used as a fiat currency substitute):

  1. lower transaction costs as compared to real currency transfers

  2. transparency of costs and charges—hidden costs and additional charges which are common in transactions of other online payment modes are absent in Bitcoin transactions

  3. contribution to the economy and access to historically inaccessible markets

  4. faster and more efficient processing of payments

  5. high levels of privacy offered to users

  6. virtual currencies are not issued by a state or government and, therefore, have the potential to be global in scope without suffering from