What coins are

A cryptoasset is a digital record of value, or of a right. Encryption locks it. It is usually kept on a distributed ledger: many computers store the same record, and no single authority has to let you take part.

The kind most of them use is a blockchain. The records sit in blocks, and each block is linked to the one before. On a public blockchain, such as Bitcoin's, anyone can read the record.

Some crypto has no ordinary asset behind it. The price is whatever the next person will pay. If buyers stop, it can fall hard. People, groups or companies run these coins. A central bank does not. Public information about some of those groups is thin.

A stablecoin is meant to stay close to something else, such as the US dollar or gold, so the price moves less. In practice the reserves behind them differ. US regulators fined Tether (USDT) $41 million in Oct 2021 for untrue statements about how closely it was linked to the dollar. Some coins that use the name have no assets behind them. TerraUSD (UST) lost its link to the dollar in 2022, and the price collapsed.

Paying with crypto is still rare. Moving it back into a bank account can fail, and tax may be due on a gain. In 2022 the lender Celsius went bankrupt owing its users $4.7 billion. Many of them could not withdraw, and got nothing back.

A crypto wallet is an app or a device. You use it to hold, send and receive ETH and other tokens, and to sign in to apps. The company that makes the wallet does not hold the crypto. It gives you a window onto it, and the tools to move it.

An exchange account is different. You can get it back with a username and password, because the exchange is holding the crypto. If the exchange gets into financial trouble, that crypto is at risk.

How a key and a signature work is on keys and signatures.

Crypto is not yet regulated in the UK in the way other investments are. There is no safety net if it goes wrong. The Financial Services Compensation Scheme is unlikely to cover a loss.

The advertising is regulated. You should see a clear warning that you can lose the money, and you should not be offered a gift or a refer-a-friend bonus to join. If the warning is missing and a bonus is offered, the firm is breaking the rules. It may be acting illegally.

Even where those advertising rules are followed, you can lose all the money.

From 25 Oct 2027, final rules apply to cryptoasset firms that are granted permission under the Financial Services and Markets Act on or after that date. The rules were published on 30 Jun 2026.

Guides for an offer to grow money, a fee, a recovery approach, a firm that stops, and tax are on Staying safe.