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Cryptocurrency is relatively young, and being far newer on the scene than the traditional currency it is far less regulated. There are fewer protocols in place to protect buyers and sellers and it is subject to less scrutiny. Cryptocurrency is a fiat currency which means it is not backed by any commodity, much like the US dollar as opposed to the British pound sterling which equates to physical gold. Of course, there are benefits to having non-regulated currency as the value can fluctuate freely and thus become sky-high…But the opposite is also true. 

For libertarians, the benefits appear to be all they care about but recent cases like the one we are focusing on in today’s article are highlighting the downside to virtual money. The Wall Street Journal had plenty to say in regards to those who have experienced the negative side of the crypto-market with exchange platforms like Binance.

Binance is one of the top-dogs that dominate the cryptocurrency exchange playing field. During the Bitcoin value plunge/ Dogecoin rise that hit during the pandemic and many other exchanges made very detrimental moves. Some began to liquidate stock and many users found themselves locked out of systems. Without access, they couldn’t trade their cryptocurrency to try to counteract the hemorrhaging.

Cryptocurrency traders are having trouble with the Binance fiasco
Image credit: cnet.com

Robinhood users are suing for the outages that they experienced during March last year and seeking some form of compensation. But, and here is where it gets tricky, Binance is registered without an official headquarters. So its users don’t have an entity to sue. The wall street journal put it this way; “But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition.” Currently, two groups are trying to find a workaround to help get some justice. One is based in Italy and the other in France they have around 700 people looking to take legal action against Binance.

The situation is pretty devastating for larger investors. As the WSJ reported one unlucky user lost $70,000. Financial tragedy aside for a second it is a little comical that the system is so simplistically flawed. Over at The Verge Elizabeth Lopatto described it as somewhat amazing that Binance can wriggle out of responsibility. The fact that it has boiled down to something as simple as ‘You can’t sue us if you can’t find us to serve the papers’ is borderline ridiculous. Anyway, Binance claims it “took immediate steps to engage with users affected by the outage” and to provide compensation. The compensation in question was three free months’ access to Binance’s VIP platform so long as they quit their whining and took it no further.

As we speak, the US Justice Department has launched a probe into Binance, looking into money laundering and possible tax evasion. So, things don’t look good for them.

Platforms like Binance excite a lot of people and for many, there is money to be made but cases such as this raise a lot of concerns. If you trade via an unregulated company then your exchanges will inevitably be recapitulating in the cryptocurrency system. This gives Binance and similar entities total impunity, seemingly without consequences. 

People are beginning to fall through the holes and it is tough not to empathize. One user reported to the wall street journal that they had lost $3 million when Binance’s app prevented him from selling. 

Whatever the outcome one thing is becoming clear: fiat cryptocurrency is proving to be dodgy transport towards fortune for many.

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