Enhancing consumer protection in cryptocurrency transactions: Legal strategies and policy recommendations

Abstract

Enhancing consumer protection in cryptocurrency transactions presents a critical challenge due to the decentralized and often opaque nature of the cryptocurrency market. This abstract explores the legal frameworks and mechanisms aimed at safeguarding consumers engaging in cryptocurrency transactions, focusing on key issues, challenges, and recommendations for improvement. Consumer protection in cryptocurrency transactions is a pressing concern due to the prevalence of fraud, hacking, and market manipulation. The lack of regulatory oversight and the pseudonymous nature of transactions make it challenging for consumers to seek recourse in cases of fraud or misconduct. To address these challenges, legal frameworks have been developed at both national and international levels. At the national level, some countries have implemented consumer protection laws that apply to cryptocurrency transactions, such as requiring exchanges to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. However, the effectiveness of these laws is limited by the global nature of the cryptocurrency market and the difficulty in enforcing regulations across borders. Internationally, organizations like the Financial Action Task Force (FATF) have issued guidelines to combat money laundering and terrorist financing in the cryptocurrency sector. These guidelines recommend that countries implement AML and KYC measures for cryptocurrency exchanges and wallet providers. While these recommendations are a step in the right direction, implementation remains a challenge, particularly in countries with limited regulatory capacity or political will. To enhance consumer protection in cryptocurrency transactions, several recommendations can be considered. These include increased collaboration between regulators and industry stakeholders, the development of international standards for consumer protection in cryptocurrencies, and the establishment of a regulatory framework that balances innovation with investor protection. Additionally, consumer education and awareness campaigns can help individuals make informed decisions when engaging in cryptocurrency transactions. In conclusion, enhancing consumer protection in cryptocurrency transactions requires a multi-faceted approach that addresses regulatory gaps, promotes international cooperation, and empowers consumers through education and awareness. By implementing these recommendations, policymakers and industry stakeholders can work together to create a safer and more transparent cryptocurrency market.