How should governments deal with crypto's rise?By
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Cryptocurrency is a digital or virtual currency that uses cryptography for secure financial transactions. It is decentralized, meaning any government or financial institution does not control it. Instead, it relies on a network of computers to verify and record transactions, known as the blockchain.

The first and most well-known cryptocurrency is Bitcoin, created in 2009 by an anonymous individual or group of individuals under the pseudonym Satoshi Nakamoto. Since then, numerous other cryptocurrencies have emerged, such as Ethereum, Litecoin, and Ripple, each with its unique features and functions.

As crypto has become a more significant part of finance as a whole, it's essential to consider the benefits and drawbacks that it may provide.

Pro Crypto

One of the main pros of crypto is its ability to provide regulatory arbitrage. Since cryptocurrencies operate on a decentralized network, they are not subject to the same regulations as traditional financial institutions. This can benefit individuals or businesses operating in countries with strict financial regulations, like China.

Another pro of crypto is its high level of security. Transactions made using crypto are secured using advanced encryption techniques, which makes it nearly impossible to modify the distributed ledger. This makes it a safer method of making transactions since crypto doesn't share the same vulnerabilities as traditional finance.

In addition, crypto has the potential to make financial transactions faster and more efficient. Traditional financial systems can be slow and cumbersome, with transactions taking days or weeks to complete. With crypto, transactions can be completed almost instantly, making it more convenient in many applications.

Anti Crypto

One of the main negatives of crypto is its high volatility. The value of a cryptocurrency can fluctuate significantly, making it difficult to use as a reliable store of value or medium of exchange. This volatility can also make it risky for people to invest in crypto, as there is little downside protection.

Another negative aspect of crypto is that it is often used for illegal activities such as money laundering and drug trafficking. While the anonymity of crypto transactions may genuinely appeal to well-meaning people, it also appeals to criminals seeking to hide their activity.

The prevalence of scams in the crypto world is also a significant concern. There have been numerous instances of people falling victim to fraudsters who promise high returns on their investments but end up performing a "rug pull." These scams can be challenging to detect and often target inexperienced investors who don't know the risks involved in crypto investment/

While crypto has the potential to revolutionize the financial industry, it is essential to be aware of the risks involved.

Discussion Questions

  • What are the main advantages of using crypto over traditional financial systems? Conversely, what are the main disadvantages?
  • What role do you think governments should play in regulating the use of crypto? Do you think they should take a hands-off approach or be more involved in regulating the industry?
  • How does the decentralized nature of crypto impact the financial system? Do you think this is a positive or negative development?
  • Do you think the use of crypto will increase or decrease in the future? Why?
  • Do you think the anonymity of crypto transactions is a positive or negative feature? Why?
  • How do you think the high volatility of crypto affects its use as a store of value or medium of exchange?

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