Cryptocurrencies have become increasingly popular in recent years, with many investors speculating on their future value. Bitcoin is the best known cryptocurrency, founded in 2009 by a person or group called Satoshi Nakamoto (the name is widely believed to be a pseudonym for a group of people whose identity remains unknown). In addition to bitcoin, other popular cryptocurrencies include Ethereum, which offers a range of innovations over and above Bitcoin.
Crypto enthusiasts believe that cryptocurrencies have a future as a new, secure, and fast method of making payments. They are also promoted as a store of value, based on the belief that their purchasing power will remain constant over time, much like gold or silver. However, the large fluctuations in prices of cryptocurrencies suggest that they have not yet established themselves as a reliable store of value.
Some cryptocurrencies have been used for illegal activities such as money laundering and terrorist financing, and evading economic sanctions. Others have been used by dissidents in authoritarian countries to avoid government restrictions. The rise of cryptocurrencies and decentralized finance (DeFi) enterprises has also raised concerns about fraud, cybersecurity, tax evasion, and financial stability.
Central banks are working to limit the influence of cryptocurrencies by developing their own digital cash, called central bank digital currencies (CBDCs). Scores of countries—representing nearly 98 percent of the global economy—are exploring CBDCs. Ten have launched fully, most of them lower-income and located in the Caribbean. CBDCs offer the speed of cryptocurrencies without their associated risks.
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