Table of ContentsChallengesRisks Associated with Cryptocurrency and MitigationReferencesCryptocurrency is digital money[1]. It uses cryptography, the process of converting information into code, as security to establish the authenticity of each transaction.[2] There are different cryptocurrencies on the market but they all have four characteristics. Cryptocurrency is decentralized. Common currencies, such as the pound sterling or the dollar, are controlled by governments or regulatory bodies. Their creation and development can be regulated by these entities[3]. Cryptocurrency is different. Its creation and transactions are based on a peer-to-peer network and are then confirmed in a public registry, accessible to all users[4]. There is no single entity issuing, guaranteeing or assigning cryptocurrency. It is therefore the pure supply-demand relationship of the cryptocurrency which governs its valuation. Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”?Get the original essay Cryptocurrency is transparent and anonymous. All transactions, from the first day of the creation of the cryptocurrency, are stored in a public ledger[5]. For privacy reasons, the public record does not show any details of the parties but only their cryptographic signatures or hashes. This allows identification while preserving anonymity[6]. Cryptocurrency is difficult to duplicate or counterfeit because it is based on cryptography and protocols involving advanced mathematics and computer engineering.[7] Cryptocurrency is a cheap alternative to using financial institutions[8]. This removes the need for a third party acting as an intermediary since transfers are made directly between parties, thereby avoiding transaction fees. Challenges Cryptocurrency raises a number of challenges for regulators at national and international levels which are mainly due to its issuance and operation. It is a self-managed system that issues units of value independently while acting as both a means of payment and a means of custody[9]. This makes regulation extremely complex because each of these functions is currently carried out by different entities in our society[10]. Establishing effective regulation therefore requires a lot of time, personnel, infrastructure and international cooperation[11]. The challenge for regulators is threefold. First, cryptocurrencies differ from each other and are used differently. Ripple is cross-border payment software for financial markets[12] while Bitcoin is used as an alternative to mainstream currencies[13]. Ethereum, on the other hand, is a ledger technology that companies use to create new programs and smart contracts via its own currency[14]. It is more than just a currency unlike Bitcoin[15]. This diversity of cryptocurrencies complicates the regulation of cryptocurrencies as a whole. Second, regulators face the challenge of lack of resources. In many countries, the resources required to regulate cryptocurrencies require justification from taxpayers and there are currently more pressing societal issues to resolve[16]. For example, in September 2017, European Union customs officials expressed concerns about the "lack of sufficient resources" to monitor virtual currencies.[17] Consequently, this lack of resources leads to dealing with cryptocurrencies on a case-by-case basis rather than regulation.