Beautiful Virgin Islands

Monday, Sep 01, 2025

Regulation: The solution to Bitcoin’s risks and unrealized benefits

Regulation: The solution to Bitcoin’s risks and unrealized benefits

Bitcoin continues to ride waves of popular interest and market volatility. But behind the swings is an unwavering reality: The largest species of cryptocurrency doesn’t measure up to its promised benefits as a peer-to-peer network, a uniquely quick and efficient payment system, or a store of value.

Bitcoin’s risks, meanwhile, are sizable. The creation and use of Bitcoin have been associated with a concentration of power among relatively few operators and owners, high energy consumption, market opacity, significant price volatility, and illicit and illegal transactions.

Together, these risks and unrealized rewards argue for enhancing cryptocurrency regulation, which currently ranges around the world from nonexistent or partial regulations to prohibitions. Discussion and action need to focus on:

* the intersection of cryptocurrency and the traditional financial system

* consumer protection

* financial stability

* public security (i.e., countering money laundering, the financing of terrorism, and other illegal activities)

Theory and practice


Distributed ledger technology is key to the promotion of cryptocurrencies like Bitcoin, which was launched in 2008. The technology enables network members, called miners, to authenticate financial transactions. The work entails solving mathematical “proof of work” problems, and miners are rewarded with newly created or “mined” encrypted Bitcoin. In this way, network users can transact directly with their peers without being monitored or controlled by a central bank or trusted financial intermediaries such as commercial banks. Bitcoin’s approach is thus “trustless,” in that it does not require trust on the part of users in a third party.

In practice, mining operations are increasingly difficult and require investing in vast computing power. Not everyone can be a miner. At present, the top five mining pools control 64 percent of total hashrates (the computing power needed to mine and process Bitcoin transactions). A few mining pools could influence the process by delaying or denying the verification of transactions, undercutting the notion of a democratized payment system.

Miners congregate in regions where electricity is relatively cheap or accessible due to lax regulatory oversight. Cambridge University’s Bitcoin Mining Map shows that more than 80 percent of global mining activity is located in remote areas of four countries:

* China: more than 65 percent of hashrates, primarily in areas like Inner Mongolia and Xinjiang, though the Chinese government has been cracking down on mining operations this year

* Russia: 6.9 percent

* Kazakhstan: 6.2 percent

* Iran: 3.8 percent

The concentration of hashrates in countries lacking in transparency has heightened the opaqueness of these mining operations. (As a point of reference, 7.2 percent of operations are located in the United States.)

These regions also tend to produce electricity using coal or other fossil fuels, making Bitcoin and similar cryptocurrencies “dirty money.” The annual usage of electricity for Bitcoin mining is comparable to Norway’s total electrical usage and matches the carbon footprint of Morocco, according to the Digiconomist Bitcoin Energy Consumption Index.

For twelve years, the Bitcoin buzz has been that it is quicker, less costly, and more efficient than conventional means of payment. But Bitcoin payments can only be made with a limited number of merchants and remain a sliver of those merchants’ sales: only 5 percent of their transactions.

Relative to credit cards, it also takes longer to authenticate and finish Bitcoin transactions: Bitcoin processes 4.6 transactions per second on average, compared to Visa’s 1,700-plus per second. Miners can reject a transaction with a fee deemed too low. A refund? Forget about it. Bitcoin payments are irreversible, excluding redress for error or fraud.

Bitcoin ownership, like Bitcoin mining, is concentrated. An estimated 1,000 individuals—known as whales—own 40 percent of the Bitcoin market. Whales are in a position to influence or manipulate the market to the disadvantage of most other participants.

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
Federal Reserve Independence Questioned Amid Trump’s Push to Reshape Central Bank
British Politics Faces Tumultuous Autumn After Summer of Rebellions and Rising Farage Momentum
US Appeals Court Rules Against Most Trump-Era Tariffs
UK Sought Broad Access to Apple Users’ Data, Court Filing Reveals
UK Bank Shares Dive Over Potential Tax on Sector
Germany’s Auto Industry Sheds 51,500 Jobs in First Half of 2025 Amid Deepening Crisis
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
×