The pseudonym (that is, users use pseudonyms) required by the transparency of the system has allowed cryptocurrencies to be associated with criminal activities, such as the financing of terrorism, mafias and wars. The lack of regulation also means that cryptocurrency investors have no resources or protection. The ethical arguments in favor of cryptocurrencies are crumbling. None of the positive statements can be sustained.
It does not promote financial inclusion, but it does expose the most vulnerable groups to greater risks and higher costs. It does not guarantee privacy or anonymity. And it's certainly not a plausible solution for improving democracy. Data theft and financial fraud are other pressing legal concerns surrounding cryptocurrencies.
The blockchain's promise of anonymity and its apparent lack of regulations may entice many users who participate in illegal activities to use cryptocurrency for their financial transactions. Cryptocurrencies are becoming very popular among sectors with intensive use of intellectual property (IP), such as the pharmaceutical, automotive, luxury and consumer goods industries, where product traceability is important and counterfeiting or “gray products” are a cause for concern. The only exception is the Electronic Signatures in Global and Domestic Trade Act of 2000, which gives limited legal validity to smart contracts. The fact that bitcoins cannot be deposited into a bank account is not a question of ethics if bitcoins are the payment of an accrued commission.
The above-mentioned legal challenges faced by cryptocurrencies are likely to be further compounded because no intermediary or authority has exclusive jurisdiction to resolve disputes related to cryptocurrencies. If a client and a lawyer agree to pay the lawyer with shares instead of foreign exchange, and the original value is reasonable at the time the parties contracted, just because the value of the shares rises or falls does not mean that accepting the shares is unethical. However, while the IRS considers Bitcoin and other virtual currencies to be legal, there are still some concerns about their legal validity. Cryptocurrencies may not make the world an ethically better place, but they can offer financial savings or operational efficiencies that justify their acceptance, and perhaps even offset some of the negative aspects described here. Existing privacy and data security laws and regulations in the United States do not address the privacy issues that have arisen due to blockchain technology.
First, since the nodes of a crypto transaction are located in different jurisdictions, they may be subject to conflicting legal frameworks. According to Rotunda, the fact that the value of Bitcoin could fall dramatically and that the lawyer is underpaid is not a question of ethics either. Before criminals can convert their illegally acquired cryptocurrencies into cash, they have to convert them into liquid cash. The Ethics Committee recently received a consultation on the ethical implications of a lawyer receiving cryptocurrency (Bitcoin) as payment of legal fees or as payment for the benefit of a client or a third party.
Nebraska is currently the only jurisdiction that has issued an opinion on the ethical issues involved by the multifaceted nature of cryptocurrency. Jim McCauley is the ethics advisor to the Virginia State Bar Association, where he has worked for almost 29 years, and teaches professional responsibility at the T. Therefore, victims of cryptocurrency theft are unlikely to have any legal recourse to compensate for their losses.