Sales and crypto regulation: transparency without protection?

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Sales Regulation Without Crypto: Transparency Without Protection?

In November, the FTX cryptocurrency exchange, recently valued at $32 billion, declared bankruptcy. Company founder Sam Bankman-Fried was eventually arrested and now faces an assortment of criminal and civil charges for what new court-appointed FTX CEO John Ray called “embezzlement.” old-fashioned funds”.

Clients who had invested in FTX may not get their assets back due to the lack of post-trade protection in the cryptocurrency, which has prompted many people to file lawsuits against the company, as well as many celebrities and athletes. who have endorsed their services.

The full impact of the collapse of FTX, the biggest cryptocurrency failure in the industry’s brief existence, will take some time to unfold. Clearly, while blockchain technology enables transparency between transactions, the stability and security of cryptocurrency still has a long way to go before financial institutions can commit to investing and trading digital assets. .

Consumer confidence is key

In early January, a joint statement was issued by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency. In the statement, the agencies made it clear to financial institutions that dealing with cryptocurrency exposes them to an array of risks, including scams and fraud.

It was a timely warning. Until the FTX debacle became public, cryptocurrency was touted not only as a safe investment, but also as a financial system so stable that it could replace credit cards for widespread consumer use. Recent events have made it clear that this will not happen anytime soon. And, if post-transaction protections aren’t implemented quickly, it might never happen at all.

For a payment method to evolve and grow, the buyer must have a certain level of security and consumer protection. This is the biggest competitive advantage that credit cards offer.

When people shop online, they mostly do so with a card. They know that in the event of a dispute with the merchant, they can request a chargeback from the issuing financial company. This same level of consumer protection, regulation and trust is needed if the goal of cryptocurrency evangelists is to see alternative payments become the go-to option.

It’s a bit of a catch-22, of course. For many, the main appeal of crypto payments is the lack of regulation and centralization. Turbulence is a feature, not a bug. But, what serves as a selling point for many is the same quality that is holding back the wider adoption of cryptocurrency.

Look forward

What does all of this say about the future role of cryptocurrency in the general economy?

It seems likely that the bankruptcy of FTX and the alleged crimes associated with the exchange will give government regulators reason to tighten rules regarding crypto companies. We can see stronger protections and full centralized control from the appropriate government agencies. Security and stability must be achieved before the general public and financial institutions begin to view crypto payments as a preferred medium of exchange.

According to consumer advice from the Federal Exchange Commission, cryptocurrency payments are irreversible. There is no centralized party or authority, which means that once you have paid with crypto, you can only get your money back if the merchant chooses to send it back.

Confused about dispute rules with alternative payments? You’re not alone. Get help today.

You could argue that this is one reason why consumers need to do their due diligence when looking for a merchant they want to transact with. However, contemporary scammers are sneaky and have found many different ways to feign legitimacy that can fool even the most cautious buyer. They can fabricate Google reviews, fake customer testimonials, and even create fake sites that perfectly replicate legitimate merchants. Whatever deceptive tactics are used, consumers need to be confident that they can get their money back if they have been misled or outright ripped off.

Traders are alone (for now)

Blockchain technology greatly reduces the risk of identity theft and fraud by third parties. However, digital transactions will need to be protected after purchase. Some form of dispute process, allowing buyers to recover funds lost due to fraud or abuse, will likely be required. This will help protect consumers from fraudulent merchants and deceptive sales practices and, in turn, build consumer confidence in crypto payments.

Are you considering accepting alternative payments like cryptocurrency? If so, having a clear and easy-to-navigate return policy for consumers buying with crypto can be a competitive advantage. This will give potential customers the much-needed confidence that seems to be lacking in the digital asset space.

A broader shift is needed across the industry to secure crypto payments. In the meantime, however, merchants hoping to experiment with alternative payment methods should take steps to try to build consumer confidence wherever possible.

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