August 14, 2018 Articles

The Origin and Evolution of Cryptocurrencies

An accessible introduction to the evolution, current uses, and regulatory perspectives on Bitcoin and other virtual currencies.

By Seoyung Kim and Sumon Mazumdar

Since the mysterious Satoshi Nakamoto introduced the world’s first cryptocurrency, Bitcoin, in 2009, over 1,800 other cryptocurrencies (i.e., digital assets, tokens, or coins) have been introduced, making some early adopters fantastically rich. Unsurprisingly, there have been cases of fraud involving cryptocurrency schemes. While some believe Bitcoin may one day become a gold-like asset class worth trillions, others, like Warren Buffet, think Bitcoin is “rat poison squared.”

Federal regulators such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have emphasized that cryptocurrencies must be properly regulated to protect consumers and investors from fraud and price manipulation. However, applying statutes written long before the “crypto” era to regulate a rapidly evolving technology is challenging. We discuss differences among various cryptocurrencies and the current regulatory views on these assets, which will likely evolve as the technology matures.

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