The Guardian’s UK technology editor, Alex Hern, talk to Rachel Humphreys about the cryptocurrency Bitcoin, which people can handle banks and traditional payment methods. It uses a blockchain – a shared public record of transactions – to create and track a new type of digital token that can only be created and shared according to the agreed rules of the network. At the heart of Bitcoin is a large database of who owns what and what transactions have been made between these owners. In contrast to a conventional bank, however, there is no central authority that manages this database.

Bitcoin’s value has risen sharply recently, and the FSA fears that crypto investment firms may overestimate potential payouts or underestimate the risks of investing in Bitcoin and digital currency-related products. As a new and relatively lightly regulated market, consumers are unlikely to have access to government-backed compensation if something goes wrong. There has also been a boom in bitcoin fraud.

Alex explains to Rachel why he thinks the use of Bitcoin is limited and discusses whether it should be banned.

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