Cryptocurrencies are virtual coins that can be traded on decentralized computer networks. They use cryptography principles to mint coins and record transactions on distributed, tamper-proof ledgers called blockchains. Bitcoin, the first cryptocurrency launched in 2009 by the pseudonymous software engineer Satoshi Nakamoto, has reached a value of more than $1 trillion, but there are many others, including Dogecoin and Ethereum.
Investors buy cryptocurrencies because they believe their prices will go up, based on the belief that digital assets are a new kind of money that will create a more transparent and efficient financial system. They also see them as a hedge against inflation, since the supply of cryptocurrencies is fixed, unlike that of fiat currencies, which central banks can expand.
But cryptocurrencies are not without risks, with cybercriminals using them for ransomware attacks and other illicit activities. They are often used on darknet markets, where they can be exchanged for illegal goods and services, notably narcotics. And they can be a conduit for money laundering, as highlighted by a $1.5 billion theft of cryptocurrency from a Russian exchange in 2022.
These risks have prompted some governments to regulate the sector, though the pace of regulation is slowing. Regulatory experts say it’s important for regulators to strike a balance between protecting consumers and encouraging innovation. The US is leading the charge on regulation, and other major economies are expected to follow suit. Five experts discussed these issues in depth in a panel at the World Economic Forum’s annual meeting in Davos this year.
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