The last few years have brought about a massive surge in cryptocurrency-related businesses. These businesses can function in any number of ways, from supporting new wallets, to facilitating smart contracts, to handling money lending, and more. And with Bitcoin having reached a new high recently, and cryptos looking as strong as ever, it’s likely that we’ll only see more of these businesses popping up in the near future.
This is a good thing for the overall development of cryptocurrency and related technologies. However, there is also delicacy to new businesses — particularly, in some cases, where a relatively new phenomenon like cryptocurrency is concerned. In these situations, there are often certain risks and challenges business owners need to be aware of. And with crypto businesses specifically, one such challenge is protection.
While odds are generally that a well-run crypto business won’t run into problems, the fact is that cryptocurrencies are still volatile, somewhat unfamiliar assets. Furthermore, many of the clients and customers you’ll deal with in handling a crypto business may hardly understand the technology. Together, these factors introduce unfortunate possibilities like lost asset value, confusion or disagreement from customers, and so on. And for this reason, it’s a good idea for those starting crypto businesses to look into ways to protect themselves in the event of unforeseen losses, technological issues, or even legal action.
The following are a few ways to gain that sort of protection.
Mind Your Investors & Partners
Cryptocurrency investment is complex even when it doesn’t have to do specifically with funding a new business venture. If you’re taking outside investments for your business though, it’s very important to draw up specific agreements and practice due diligence regarding your investors and/or partners. Be very clear about who is making decisions on the company’s behalf, who is responsible for legal matters, and where liability lies. By no means do these have to be points of confusion or contention; more often than not they’ll be quite straightforward! But to legally protect the business, as well as yourself, it’s important to understand and maintain authority with regard to potential legal disputes and liabilities.
Form an LLC
Some of the issues just discussed can be solved naturally by structuring your cryptocurrency business specifically as a Limited Liability Company. An LLC offers protection to you as the business owner in the event that a significant loss of assets or legal issue arises. Essentially, while this structure allows you to maintain full authority over your business, it also formally separates you and your business as separate entities. This is more about protecting your own assets than the business itself, but it’s still the most logical structure for a new and growing company.
Pursue Liability Insurance
Another form of protection relating to liability is to simply pursue liability insurance on behalf of the business. This, for those who may not be familiar with the idea, is exactly what it sounds like. You (or your business) will contribute regularly to an insurance company, which will in turn cover many potential damages that could arise from liability issues. It is an effective way of guarding your crypto business against significant financial setbacks relating to isolated issues or accidental problems.
Protect Any Cryptocurrency You Hold
If your crypto business involves holding cryptocurrency on customers’ behalves at any point, you would also do well to take steps to protect that cryptocurrency. This means using only reputable wallets, considering “cold” wallets (or offline ones), diversifying storage, backing up private keys, and potentially a variety of other security measures. Basically, you should take every reasonable measure you can to make sure that customers’ cryptocurrency is safe and protected, so as to preempt any possible issues.
These are actually fairly simple steps, all things considered. Through them though, you can legally protect your new crypto business and begin to grow and expand with confidence and security.