A cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers.

A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Blockchain technology promises immense opportunity to bring about profound changes to this industry. The global financial system moves trillions of dollars daily, serves billions of people, and supports economy worth more than $ 100 trillion (estimates range form $ 87.5 million to $ 112 million, according to IM).

General impact:
In the financial industry, it has been more secured as clients’ information are well protected. Allowing an institution to transfer money, the transacting parties not only give away private information related to the transaction, but also give it access to their funds as well as to personal data.

Also, using a decentralized payment-system – without any intermediary – transaction costs are low, while no access to funds or personal information is given away to any third party.
Besides, decentralized payment-systems enable peer-to-peer transactions, i.e. two individuals can exchange value without relying on a centralized third party. This is a major difference to existing payment solutions, as no financial intermediary is required for a transaction. In comparison, for a bank transfer two banks need to exchange money on behalf of their customers.

Modern application of NTF (Non-Fungible Tokens):
A token is a digital representation of a good, service or other form of value or utility. Within the realm of digital assets, the tokens are representatives of value like a stake, a voting right, a toll, a currency, a store of value, ownership rights or multifunctional access within an ecosystem. The token doesn’t have value in, or of itself, and the value comes from the asset it represents. When someone creates a token that represents any of the aforementioned types of services and goods, it’s fulfilled through a process of tokenization.
The common characteristics of the NTF is:
1. Limited supply: issued in a limited number of units.
2. non-interoperable: the feature that any asset is identified and represents a unique item within its own ecosystem.
3. Indivisible: It’s important to acknowledge that a NFT is represented as a whole item and cannot be divided into smaller denominations.
4. Indestructible: All the metadata which is stored via smart contracts in the blockchain cannot be replicated, removed or destroyed, granting ownership rights of the NFT, to the wallet or peer that possess it.
5. Verifiable: This allows a traceability within the ledger as all the transactions are historically registered and stored within the blocks of data.
With the rise of NFTs, many different industries have begun to create new business opportunities in the online world. One of the attractive game features is that it provides ownership records of in-game items. NFTs provide an ownership record of the items they represent, meaning that equipment and props obtained in the game can follow the player and no longer fluctuate with the server. NFTs have influenced the development of the animation industry as well. Also, a large number of artworks are sold on the internet through NFTs on several selling platforms that have emerged in quick succession, creating a new wave of enthusiasm.

Potential risks associated with the development of crypto:
1. The relevant authorities have ascertained that crypto assets pose risks from an investor protection and market integrity perspective.
The European supervisory authorities have recently reiterated their warning that crypto assets are highly risky and speculative.

Crypto assets are not suitable for most retail investors (either as an investment or store of value, or as a means of payment) who could lose a large amount (or even all) of the money they have invested.
Consumer protection risks include (i) misleading information, (ii) the absence of rights and protections such as complaints procedures or recourse mechanisms, (iii) product complexity with leverage sometimes embedded, (iv) fraud and malicious activities (money laundering, cyber-crime, hacking and ransomware), and (v) market manipulation (lack of price transparency and low liquidity).

2. The significant volatility of crypto assets in recent months has not resulted in contagion or any notable defaults by financial institutions, but the risks of these are increasing.
Greater involvement of financial institutions could fuel the growth of crypto assets still further and increase financial stability risks. Any principal-based crypto-asset exposures on the part of systemic institutions, especially if the assets involved are unbacked, could put capital at risk, with potential knock-on effects on investor confidence, lending and financial markets if the exposures are of a sufficient scale. Financial institutions themselves could face reputational risks as well as climate transition risks.

3. If current growth and market integration trends persist, then crypto assets will pose a risk to financial stability.
Unbacked crypto-assets can have financial stability implications through four main transmission channels: wealth effects, confidence effects, financial sector exposures and the use of crypto-assets as a form of payment. While all these channels are increasing in size and complexity, they lack internal shock absorbers that could provide liquidity at times of stress. For example, the wider involvement of financial institutions or the use of crypto assets as a form of payment would increase the potential for spillover to the wider economy, particularly if leverage were employed.

Systemic risk increases in line with the level of interconnectedness between the financial sector and the crypto-asset market, the use of leverage and lending activity. Based on the developments observed to date, crypto-asset markets currently show all the signs of an emerging financial stability risk. It is therefore key for regulators and supervisors to monitor developments attentively and close regulatory gaps or arbitrage possibilities. As this is a global market and therefore a global issue, global coordination of regulatory measures is necessary. It is important to close regulatory and data gaps in the crypto-asset ecosystem.

References:
https://www.investopedia.com/terms/c/cryptocurrency.asp
http://repec.mnje.com/mje/2018/v14-n01/mje_2018_v14-n01-a18.pdf
https://www.swiss-economics.ch/RePEc/files/0056JaagBach.pdf
https://d1wqtxts1xzle7.cloudfront.net/68796447/PET_Journal_NFTs_Innovation_beyond_the_craze-libre.pdf?1629291510=&response-content-disposition=inline%3B+filename%3DNon_Fungible_Tokens_NFT_Innovation_beyon.pdf&Expires=1690793781&Signature=Mdxp850JqLIVdTH7QWcXPLBVd7IqrzTVkIfvaj2r7w3KmvbTPdlXAj-BYyoZWi~rMVrNULz~MTVdhSUikxe3M7~8Ptiw6zTRhjtERFlGf5nU~-bjm4Bf30oNS8nSGJu-4tQUNpcHiwUf23FvYXbCcO6vfFuAWBPwR9J-k1jCc59S6iuXJB6bllGjfXeVtlKYLj~0EZ2iUs0PuJw4i5TvuxPugA54uyxBQhOd8jS~NlNLdmJQgCLB~iXjLdktTEhRUR2J0glHnC4NSl4GgdfZfw4LB4YQg~2JuhXjVrEqf~Hj-sBJJH-sMiooa9QD79ektZAL9QZ5RV3RMPxF37bXng__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
https://www.mdpi.com/2071-1050/15/9/7573#
https://www.ecb.europa.eu/pub/financial-stability/fsr/special/html/ecb.fsrart202205_02~1cc6b111b4.en.html#:~:text=Crypto%2Dassets%20lack%20intrinsic%20economic,crypto%2Dassets%20highly%20risky%20instruments