Seeing is Not Believing – The Risk of Bitcoin OTC Trades
While Bitcoin OTC trading offers numerous advantages, it’s essential for investors to understand and mitigate the associated risks.
Here’s what you need to know….
🕵♀️ Counterparty Risk
In OTC trades, you’re dealing directly with another person or private entity. The risk?
The other party might default on their obligations thereby causing you significant losses.
Hence, “seeing is not believing” until a transaction has been done to prove otherwise.
Ensure to always do your due diligence and work with reputable brokers to minimize this risk.
⚖ Regulatory Risks
The regulatory landscape for OTC trading is complex and varies by jurisdiction.
Compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations is crucial to avoid legal pitfalls.
🛡️ Security Concerns
OTC trades lack the built-in security mechanisms of exchanges, such as escrow services.
Where possible, use a lawyer or law firm in addition to the OTC broker.
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