Cryptocurrencies use encryption principles to mint virtual coins that can be exchanged without a central authority. They’re traded on decentralized computer networks between people with virtual wallets, and transactions are recorded publicly on distributed, tamper-proof ledgers known as blockchains. Bitcoin is the best-known cryptocurrency, with a market capitalization that has peaked at over $1 trillion.

The popularity of cryptocurrencies has raised concerns about security, regulation, and the risks to consumers. Many of the biggest hacks involve cryptocurrencies, and even legitimate firms are susceptible to wild fluctuations in price that can produce big gains or losses for investors. Unlike traditional financial products, cryptocurrencies are not subject to consumer protections like chargebacks, so users can’t get their money back if they lose or spend them incorrectly.

Amid fears of a cryptocurrency bubble, governments are increasingly trying to regulate the industry. For example, the US has passed laws to license crypto exchanges and to tax profits from trading and investing in digital currencies as capital gains. The GENIUS Act, which President Trump signed in July, also targets stablecoins—digital currencies whose value is pegged to a fiat currency like the dollar.

But these moves could backfire if they increase demand for unregulated coins. That’s because cryptocurrencies are more difficult to track than other forms of money. Moreover, they can be used to evade taxes and sanctions. For instance, dissidents in authoritarian countries can raise funds in bitcoin to avoid U.S. sanctions on Russia and Iran, while terrorist groups can buy weapons in bitcoin-powered dark web marketplaces like Hydra.