Not a single person living on our planet hasn’t heard about the blockchain craze, and Bitcoin in particular, in recent years. We assume that you are reading this article because you are looking for a lawyer who can assist you in making Bitcoin transactions.
For this, we will first explain to you what Bitcoin is, how it works and how the lawyers of this field may help you carry out transactions in an effective manner in order to help you do so safely, while taking minimal risks – both in carrying out the transaction and with the transaction derivatives such as taxation matters and more.
A bit about Bitcoin
Bitcoin is a cryptocurrency (digital currency) designed to act as an alternative form of money and form of payment. The difference from the money we know today is that the goal that stands in the infrastructure of the world of blockchain and cryptographic currencies is that the control of these currencies will be external and will not be held by the government, a group or a single entity.
Thus, in effect, the need for third-party involvement in financial transactions can be removed. Bitcoin was introduced to the public in 2009 by an anonymous developer (or group of developers) who use the alias Satoshi Nakamoto.
Bitcoin has become the most popular cryptocurrency in the world. Its popularity has inspired the development of additional cryptocurrencies such as Ethereum and Ripple. Those competitors are trying to replace Bitcoin as a payment system or used as the technology to secure information and record transactions.
How does Bitcoin work?
The blockchain is a kind of shared public ledger on which the entire Bitcoin system rests. All confirmed transactions are included in the blockchain. This way, simplistically, the Bitcoin wallets can calculate their spending balance and thus new transactions can be verified and ensure that they are really owned by the party that used the Bitcoin. The integrity and chronological order of the blockchain is enforced using crypto.
A bitcoin transaction is done by transferring the Bitcoin currency between different crypto wallets. When the transaction is executed, it is included in the blockchain. Bitcoin wallets keep a secret data called a “private key” which is used to sign transactions, and provides mathematical proof that they came from the owner of the wallet.
The same signature also prevents the transaction from being changed by another person after the transaction is made. All transactions are broadcast to the network and usually begin to be confirmed within 10-20 minutes, through a process called mining.
So what exactly is Bitcoin mining?
Mining is a decentralized consensus system used to confirm pending transactions by including them in the blockchain. When one wants to confirm transactions and include them in a block, the chronological order in the blockchain, in which the transaction was carried out, is meaningful. In effect, this enables network neutrality and allows different computers to agree on the state of the system.
To confirm the transaction, it is necessary to package the transactions in a block that conforms to very precise encryption rules, which will then be verified by a predetermined set of rules. These rules prevent the possibility of changing previous blocks.
Another advantage that is made possible through the mining procedure is the lack of the ability of outsiders to add new blocks to the existing blockchain and thus defraud the system. In fact, as long as there is no majority of 51% of the miners to approve the transactions, it is not possible to control everything included in the blockchain or replace certain blocks in the chain.
In this context, indeed, if a majority of 51% exists, this may endanger the entire Bitcoin system, however, there are tens of thousands of miners in the world, and even more than that.
The likelihood that all of these miners will join forces to take over the system is zero. Moreover, this type of action may be a kind of “self-inflicted harm” because as a result, the value of Bitcoin is expected to plunge and thus they too will lose the value of the transactions.
The legal practice of cryptocurrencies and Bitcoin in particular
Since the creation of Bitcoin, it has gained recognition and popularity due to the ease of making transactions using it and the anonymity feature it creates. All of this has created difficulties for law enforcement agencies and regulators trying to place cryptocurrencies like Bitcoin inside a regulatory framework.
In the USA, it can be seen that the attempts to create a uniform legal framework for cryptocurrencies have failed. To this day, it can be seen that the CFTC treats Bitcoin as a commodity, while the IRS treats it as an asset.
In light of these problems, there is a need to choose a crypto lawyer who can help in making Bitcoin transactions and dealing with the different regulation that is required as a result of dealing with crypto and Bitcoin in particular.
The lawyers working in the blockchain field
After understanding what the blockchain is, what cryptocurrencies are and how Bitcoin works, we will focus on the main thing – how a lawyer in the field of crypto can help with a Bitcoin transaction.
The lawyers who deal with blockchain and Bitcoin in particular include lawyers with different specializations. Among them are lawyers who specialize in securities law, gambling, intellectual property (IP), regulation of gambling, information security and other relevant disciplines.
Crypto and blockchain lawyers support clients and help them understand the field and effectively and optimally utilize the full range of business opportunities that come their way. All of this is done at the same time as helping to overcome legal and regulatory barriers in this dynamic field.
With expertise in all aspects of crypto regulation and the rapidly developing legal environment in this field, the lawyers of this field help clients navigate through the uncertainty.
Approaches about Bitcoin
When Bitcoin was first introduced, it created a series of legal problems – Bitcoin was the first decentralized digital currency in the world that is not controlled by a government body, but at the same time, it can be created by any person who has enough computing power to create cryptocurrencies.
Regulators, law enforcement agents and tax authorities have struggled to determine where to place Bitcoin on the legal map. The easiest way is to compare Bitcoin to casino tokens. Both forms of currency are ‘legal’ in the sense that they represent value, which will eventually be converted into legal currency.
If no conversion is done, then the token itself has no value. However, when the token is converted to legal value, taxes must be paid for the cash or other value received, which can then be redistributed to the economy. However, there are other approaches that see Bitcoin as a legal currency for all intents and purposes, and the only difference is that it is conducted entirely digitally.
Making Bitcoin transactions
While examining the Bitcoin, and how it works, we realized that making transactions is not that difficult. All that is required is a wallet and sometimes a broker to carry out the transaction. So why do you need crypto lawyers in a Bitcoin transaction?
1. Transaction documentation
Crypto lawyers can help you understand how to collect all the wallet addresses (public keys) of those anonymous people, with which you have contacted. This way, you can deal with many issues that may come later. If there is no documentation, you may find yourself in a problem – whether it is possible scams, losing money and facing the tax agencies in Israel.
2. Bitcoin taxation
In Israel, digital currencies are considered an asset and therefore require a full report to the tax authority and payment of tax accordingly. If a Bitcoin trade is not reported, this may be considered a tax offense, which may lead to fines and even, at a later stage, to the filing of a criminal indictment for tax evasion.
Therefore, a crypto lawyer can help pay the tax on Bitcoin according to the law and give you peace of mind.
3. Assistance against fraud
In many cases, it is appropriate to consult with lawyers before trading or accepting payments in Bitcoin. In recent years, unfortunately, the number of cases, in which innocent people are being scammed, is increasing. Crypto lawyers can help you understand that a Bitcoin transaction is done legitimately with a party, which has no interest in committing fraud against you.
4. Constant support
Beyond checking for fraud, you may not be knowledgeable in the field and are reading the article because a business you work with wants to pay you in the form of Bitcoin and not in the fiat currencies that you are used to receiving.
Crypto lawyers help businesses that choose to accept Bitcoin as payment. Thus, they will help you prepare the infrastructure and assist you with any legal issue that may arise in this context.
Crypto lawyers are becoming more relevant with each passing day in regards to the blockchain world, and Bitcoin in particular. We recommend using the service of lawyers in order to get information about Bitcoin, its innovations, making sure that there have been no legislative changes in the field and anything that will help you navigate through this dynamic world with peace of mind.
Moreover, the assistance of crypto lawyers, when you make a Bitcoin transaction, may help you deal with many matters in the field of taxation. If you do not make these reports correctly, you may face criminal proceedings or pay significant fines, which is a shame.
Therefore, it is best not to wait and contact the law office of Daniel Yanovsky, who specializes in this field and will assist you in every aspect professionally and efficiently.