The fast-moving world of cryptocurrencies keeps investors, observers and regulators on their toes. CFR looks at the latest crypto news, high-profile interviews, explainers and unique stories in this dynamic industry.
Bitcoin and other cryptocurrencies use advanced coding to verify transactions, obviating the need for a trusted central authority like a bank. They are traded on decentralized computer networks between people with virtual wallets and recorded publicly on distributed, tamper-proof ledgers known as blockchains.
Proponents say cryptocurrencies are a new kind of money that could replace national currencies and traditional financial instruments. But they have numerous drawbacks, including limited acceptance as a means of payment, a tendency to generate large profits for investors, and a lack of consumer protection. They are also vulnerable to hacking, as demonstrated by the 2018 collapses of Coincheck and BitGrail.
Cryptocurrencies have become a magnet for investors seeking higher returns than those available in traditional investments, such as stocks or bonds. Their value is driven by speculative demand and supply, and the currency’s volatility has generated big gains and losses for investors. And they are often subject to far less regulatory scrutiny than traditional securities.
Critics point to cryptocurrency’s use by criminals and terrorist groups, as well as its role in evading economic sanctions. They also worry that the large price fluctuations make cryptocurrencies unsuitable as a store of value. And the energy-intensive process of mining them is a significant contributor to climate change. Some governments have begun to regulate the sector, and others are experimenting with their own central-bank digital currencies (CBDCs).