Bitcoin is a reputable cryptocurrency that uses open-network and peer-to-peer protocols for managing transactions. Currently, Bitcoin is used as a form of payment for the goods and services offered; and also as a trading currency. Bitcoin is the most widely used decentralized virtual currency, and it is volatile too. As 2021 started, the price of Bitcoin reached its all-time high & which continues its upward trek till now. Today, the current price of Bitcoin is $58,328.60 with a market capitalization of $1,088,255,971,727. Some crypto experts and investors predicted that the price of Bitcoin will rise more in the coming future & may reach $100,000 soon. Several investors plan to invest or trade in Bitcoin as the price goes up every day. By any chance, if you are planning to invest or trade in Bitcoin. In that case, Bitcoin Future is an automated trading platform for Bitcoin & cryptocurrency, which runs on a smart trading robot program with an AI-based algorithm & comes with a high rate of accuracy. As Bitcoin Future is fully registered and legit, but to know more, you can check Bitcoin Future Review. Several businesses have started to accept Bitcoin as a payment, and it is also accepted widely by people as there are no third-parties, central authorities, and banks involved in managing the transactions. Besides, the issuing of Bitcoins is carried out by the Bitcoin network. Since Bitcoin is used as a form of payment, can it be considered as a verified source of funds?
Explanation of Source of Funds
The Source of funds can be explained as where your money comes from. The money, either fiat currency or cryptocurrency exchanged through transactions, should come from a valid source. To make sure that your funds come from a legitimate source, you need to offer documents such as company profits, salary, and sold properties as a source of funds. If you intend to use Bitcoin, you need to think twice before investing in small businesses, even though there are no laws or regulations that limit the use of Bitcoin as a source of funds.
Why Do You Need to Verify Your Source of Funds?
- If you are intending to do a cryptocurrency subscription, you need first to verify the source of funds which becomes mandatory. One of the significant concerns with cryptocurrencies is while the user needs to fill in a subscription form, they need to show the fund details with their KYC (know your client) documentation. Otherwise, it becomes difficult to verify the cryptocurrencies that are transferred to the wallet that belongs to the user.
- Since Bitcoin and cryptocurrencies are not regulated and also because of their anonymous presence, it becomes a playground for money launderers and terrorists to use cryptocurrency without anybody authorizing it or not having any knowledge about how the funds appeared.
- Using fiat currencies, you need to abide by the laws, which means you need to offer information and documents to the regulatory authorities for checking. To convert your cryptocurrencies into fiat or buy goods and services, you need to ensure that the company you are dealing with is not engaged in anti-money laundering or fraudulent activities.
What Are the Pros and Cons of Using Bitcoin as a Source of Funds?
- Traditionally, Bitcoins were used as a payment form for buying goods and services, rather than using as investments for funding enterprises. As of late, people are accepting Bitcoin as an investment to fund their business.
- In the cryptocurrency sector, the transactions are stored in a distributed ledger technology known as the blockchain. Even though anonymity will not be disclosed, you can instantly view all the transactions and see the amount that was transacted.
- If you are raising funds in cryptocurrencies, it is highly risky as the value of cryptocurrencies is prone to market fluctuations compared to fiat currencies.
- The unexplored nature of cryptocurrencies and Bitcoin makes it a less exciting currency for investment. Several companies are skeptical about cryptocurrencies. They do not accept cryptocurrencies or Bitcoins into their funding. Besides, few startup businesses and enterprises have begun to accept Bitcoin as their source of funds.
- Cryptocurrencies are different from fiat currencies in several aspects, and some of the risks associated with them are also different. Bitcoin’s ever-fluctuating price and its market volatility are considered as the main reasons for several people who do not consider Bitcoin as a reliable source of funds.
- If you are using Bitcoin as a source of funds, you can either go through huge financial gains or heavy losses if the market turns over. Because of its volatility, the price of Bitcoin might go up or suddenly crash within a matter of days. These fluctuations in the Bitcoin price make it an inappropriate asset for long-term investing.
- Several companies accept Bitcoin as a mode of payment in small quantities; hence, it does not play an important role in the company’s success or failure. But it might not be a good idea if you use Bitcoins as a source of funds for investing in firms.
How Do Regulatory Authorities View Bitcoin as a Source of Funds?
With the rise of cryptocurrencies and Bitcoin exceeding the expectations and boundaries and into people’s lives, regulators find it difficult to come up with a regulated model to suit the cryptocurrency needs. Bitcoin has not been considered as an illegal currency in several jurisdictions around the globe. However, some jurisdictions like Russia and Argentina highly restrict and ban foreign currencies. Jurisdictions in Thailand restrict the licensing of Bitcoin exchanges and their entities. Regulators around the world are taking steps to provide businesses and individuals with regulations on how to use cryptocurrencies in the regulated financial system. For example, FinCEN (the Financial Crimes Enforcement Network) United States treasury department, recently issued non-binding guidance about how it characterizes specific activities involving virtual currencies.
To summarise, Cryptocurrencies and Bitcoin have a long way to go, and the value of Bitcoin comes from the exchange of goods and services. As any authority does not regulate Bitcoin, it is not considered a reliable source of funds. Currently, Bitcoin price is going up, and many of them are taking advantage of its bullish trend. Even though several people who are holding bitcoin are interested in investing their bitcoin in businesses, there is still no clarity that bitcoin can be considered as a source of funds for start-ups and businesses.