What is crypto? Bitcoin and cryptoassets in plain words

A cryptoasset is a digital asset that exists only as an entry on a shared electronic record, and can be transferred directly between users over the internet without a bank in the middle. Bitcoin, launched in 2009, was the first and is still the best known. Thousands of others have followed, often called “coins” or “tokens”.

Blockchain in two sentences

A blockchain is a ledger (a list of transactions) copied across many computers around the world, where new transactions are added in blocks that are linked to the previous ones, so changing old entries is extremely difficult. Rules written into the software decide who may add the next block and how everyone agrees on the current version, with no central company in charge.

What gives a cryptoasset value?

Unlike a share, most cryptoassets do not give you a slice of a company’s profits. Unlike a bond, they pay no fixed interest. Their price depends almost entirely on what other people are willing to pay for them, which in turn rests on how useful, scarce or popular they are believed to be. Supporters point to features such as a fixed supply or sending value without a bank; critics point to the lack of any income behind the price.

Stablecoins

A stablecoin is a cryptoasset designed to keep a steady value, usually one unit of a traditional currency such as the US dollar or the euro. Most do this by holding reserves (cash, short-term government bonds) meant to match the coins issued. They are mainly used to move money around crypto platforms. A stablecoin is only as stable as its reserves and its issuer; some have lost their peg in the past.

Why prices swing so much

Cryptoasset prices can rise or fall by large amounts in a single day. Reasons include:

• No income to anchor the price, so it rests on sentiment and expectations.
• A market that is young and, for many coins, thinly traded, where large orders move prices.
• Borrowed money: many traders use leverage, so falls trigger forced selling that deepens them.
• News on rules, hacks or platform troubles, which can shift sentiment quickly.

The main risks

Risk	What it means
Volatility	Large, fast price falls. Losing most or all of the money put in is possible
Scams	Fake platforms, “guaranteed return” schemes, impersonators on social media and romance scams are common
Losing your keys	Crypto is controlled with a secret code called a private key. Lose it and the assets are usually gone for good; nobody can reset it
Platform failure	Exchanges and lenders have collapsed or been hacked, and customers have lost money held with them
No safety net	No deposit guarantee, and transactions sent by mistake usually cannot be reversed

If someone contacts you out of the blue with a crypto opportunity, promises fixed returns or pushes you to act fast, those are classic warning signs of a scam.

How the EU regulates crypto: MiCA

The EU’s Markets in Crypto-Assets Regulation (MiCA) is the first EU-wide rulebook for crypto. It came into force in June 2023 and applies in stages:

• From 30 June 2024: rules for issuers of stablecoins (called “e-money tokens” and “asset-referenced tokens” in the law).
• From 30 December 2024: rules for crypto-asset service providers (CASPs), the firms that run trading platforms, hold crypto for customers or exchange it for money. They need a licence from a national regulator, which then lets them serve customers across the EU.
• Until 1 July 2026 at the latest: firms already operating under national rules could continue during a transition period while they applied. Several countries set shorter periods. After that, a firm without a MiCA licence may no longer offer these services in the EU.

Licensed firms must keep customers’ assets separate and follow rules on information, conduct and complaints. It does not guarantee any cryptoasset’s value or protect you against losses from price falls. ESMA, the EU’s markets regulator, keeps a public register of licensed providers.

Crypto and tax

Gains from crypto can be taxable. The rules depend on where you live and how long you held the asset, and they change; check with the tax authority or a qualified accountant.

For the bigger picture on how risk and potential return relate, see risk and return.