Washington officials have been talking about regulating digital currencies more, and worries about a heavier hand have played a role in the recent swoon in prices.
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Gary Gensler, who took over as chairman of the Securities and Exchange Commission last month, has said that cryptocurrency markets would benefit from more oversight to protect investors.
In a hearing before the House's financial services committee earlier this month, Gensler said neither the SEC nor the Commodity Futures Trading Commission, which he used to head, has a "regulatory framework" for trading on cryptocurrency exchanges yet. He said he thought Congress would ultimately have to address it because "there's really not protection against fraud or manipulation."
How Bitcoin came to be
It's a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn't matter: The currency obeys its own internal logic.
In 2016, An Australian entrepreneur stepped forward and claimed to be the founder of Bitcoin, only to say days later that he did not "have the courage" to publish proof that he is. No one has claimed credit for the currency since.
Could a digital currency selloff cause broader economic damage?
Regulators aren't very worried about a possible crash in digital currencies dragging down the rest of the financial system or economy.
Even with the recent sell-off, digital currencies have a market value of about $1.5 trillion, according to the website coinmarketcap.com. But that pales compared with the $46.9 trillion stock market, $41.3 trillion residential real estate market and nearly $21 trillion Treasury market at the start of the year.
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The European Central Bank said Wednesday that the risk of cryptocurrencies affecting the financial system's stability looks "limited at present." In large part, that's because they're still not widely used for payments and institutions under its purview still have little exposure to crypto-linked instruments.
Earlier this month, the Federal Reserve said a survey of market contacts found roughly one in five cited cryptocurrencies as a potential shock to the system over the next 12 to 18 months. That's a turnaround from the fall, when a similar survey found none mentioning cryptocurrencies.
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