Cryptocurrencies have experienced explosive growth recently, partially because they're a decentralized currency but also due to increased awareness and technological advancements. But not everyone thinks the "crypto craze" is a good thing.
CBS News reported that crypto has taken over Wall Street, and even Walmart and Amazon will get to have their own digital currencies thanks to the GENIUS Act signed by President Donald Trump earlier this year.
While the burgeoning world of online currencies may offer a way to earn wealth rather easily, Amanda Fischer, who was a top official in the Securities and Exchange Commission during Biden's administration, believes crypto could be dangerous to the economy since it's not backed by anything and is "highly volatile."
"We heard the same thing about subprime mortgages going into 2008," she said. "We heard the same thing about complex financial derivatives going into the last crisis, too. These products are wonderful and there are ways to extract so much value in wealth, until they're not. And I fear that crypto is going to follow down the same path. Things are going great many times, until they're not."
Because of the risks associated with cryptocurrencies, Congress has proposed a bill attempting to regulate crypto, even though the industry invested more than $167 million in candidates supportive of the currencies before the recent election.
While the Federal Reserve reported that only 8% of Americans have bought cryptocurrency in the last year, and only 2% have actually used it to make purchases, there are numerous scams in the industry due to limited regulations and the industry's complexity, making new users vulnerable to scammers.
Following the initial boom, and certainly with the exception of savvy investors even since then, it's reportedly now much more likely that people will lose money in crypto than make a fortune; according to Americans for Financial Reform, around 75% of users who invested in the currency between 2015 and 2022 suffered losses.
But even with these risks, cryptocurrencies are more popular than ever, and the price of bitcoin recently reached a record high of over $120,000. Investors believe crypto is here to stay for the foreseeable future, but that's not such great news for the climate.
While the industry has improved greatly in recent years to incorporate more renewable energy and capitalize more on excess power generation, many crypto facilities still require massive amounts of water and electricity — much of which comes from fossil fuels. Further, some residents who live near these facilities have even complained about developing health issues.
Some AI and crypto operations have at least started powering their facilities with clean energy, and some have even invested in renewable energy projects. So, crypto certainly has the potential to advance society in some ways, particularly in advancing solar, wind, and other green technologies. There are also green cryptocurrencies coming out, such as Bitcoin.ℏ and Lightchain AI, which invests in sustainability projects. As for people's bank accounts and the overall economy, crypto may not offer many benefits, at least in the long term.
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It is the future of currency 😎 "You could think of it as gambling, you could think of it as a collectible, you could think of it as a type of investment. But I think what's important to understand is that crypto is highly volatile. It's highly speculative," Fischer, the former SEC official, said.
"Crypto is often marketed to individuals as an investment opportunity that will yield them the possibility of great returns," she said. "But unlike, say, a stock, which represents a part-ownership of a company, [crypto] is not backed by any sort of business that is producing goods and services."
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