Clarifying categorisation

The cryptocurrency market and financial crime threats

by Poong Yuan

According to research by McKinsey & Company, more than 10 per cent of adults in the UK report holding or having held a digital asset like cryptocurrency. ¹ The growing popularity in the cryptocurrency market which has resulted in the creation of more crypto products further affirms the need for regulators to clarify the categorisation of it. In 2008, Satoshi Nakamoto published the Bitcoin white paper marking the beginning of the use of cryptocurrency. Following the definition by the International Monetary Fund (IMF), virtual currencies are defined as digital representations of value created by private developers. Unlike fiat currencies which are backed by the central bank and government, virtual currencies are not backed by any sources and can be categorised into "centralised" and "decentralised". Centralised exchanges offer a platform for users to trade on and are controlled by a centralised entity (for example, Coinbase or Bitfinex), and decentralised exchanges allow users to control their assets on blockchain. Therefore, transactions are private and anonymous (for example, Bitcoin). It is usually the decentralised cryptocurrencies that attract concerns from authorities and the need for regulatory supervision.