Follow the latest cryptocurrency news to stay on top of bitcoin and other virtual assets. Cryptocurrencies are increasingly used as a way to make investments. Investors buy digital tokens “because of a speculative belief that their prices are going up in the future, because they are part of a new future being built on the blockchain,” CFR Senior Fellow Sebastian Mallaby explains. This speculation can lead to wild price swings, and crypto investments often come with little regulatory protection like deposit insurance. High levels of volatility in 2022 also contributed to a series of bankruptcies among exchanges and other crypto firms, including the failure of FTX, at the time the world’s third largest cryptocurrency trading platform.

Critics, however, point to the growing use of cryptocurrencies for illicit activities, such as ransomware attacks, terrorist financing, and sanctions evasion. Many of these transactions take place on the so-called darknet markets, where users can anonymously purchase a wide range of goods and services, ranging from drugs to guns. Some of these illegal marketplaces also accept cryptocurrencies.

The popularity of cryptocurrencies has also raised questions about their governance, which can be difficult to oversee given the decentralized nature of the technology. Moreover, the rise of DeFi enterprises has created billions in transactions in an unregulated sector, raising concerns about fraud, tax evasion, and cybersecurity, as well as environmental harms from bitcoin mining, which uses enormous amounts of energy. As a result, several countries are exploring central bank digital currencies (CBDCs), which they hope can offer the benefits of cryptocurrencies without the associated risks.