As the value of bitcoin and other cryptocurrencies continues to rise, whether the money pouring into digital currency is speculative or an investment is dominating discussion in the markets.
Bitcoin soared to fresh records on Tuesday, putting it on course for $10,000, but the virtual currency's stratospheric rise has fuelled fears of a bubble after a 10-fold increase this year.
The cryptocurrency, launched in 2009 as a bit of encrypted software written by someone using the Japanese-sounding name Satoshi Nakamoto, has had a roller-coaster ride that has taken it from just a few US cents to its current sky-high valuation.
Traded on a specialist platform, with no legal exchange rate and no central bank backing it, bitcoin is monitored and regulated by its community of users, and is used to buy everything from pizza to a pint in a London pub.
But it has attracted widespread criticism, from financial industry titans to governments.
JP Morgan Chase boss Jamie Dimon in September slammed the unit as a "fraud" and said he would fire his employees if they were caught trading it, while China has shut down bitcoin trading platforms and South Korea's prime minister on Tuesday voiced fears it could lead the young to get involved in fraudulent crime.
Still, the opposition has not stopped a dizzying surge in bitcoin this year, with its value jumping a 2017 low of $752 in mid-January to a record high above $9,895 on Tuesday afternoon. Its value has risen about 45 percent in the past two weeks alone.
Analysts say the popularity has been driven by growing interest from major investors and a decision last month by exchange giant CME Group to launch a futures marketplace for the currency, which has not been listed on a major bourse before.
Big gains, big risks
As its fortunes have improved, retail investors have also rushed to jump on to the bitcoin bandwagon, although fears of a bubble are growing, having witnessed wild swings in the past.
"The biggest issue with bitcoin is that with no government backing or regulation, the gains may be big – but the sell-offs can be equally as drastic," warned James Hughes, chief market analyst of Britain-based forex trader AxiTrader, in a note to clients.
How it works
Transactions happen when heavily encrypted codes are passed across a computer network.
Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and which are maintained by a network of computers.
Hundreds of other digital currencies have been created since its launch, but bitcoin remains by far the most popular.
Its supporters insist it offers an efficient alternative to traditional currencies because it is not subject to the whims of a state that may, for example, devalue its money to boost exports.
Commentators also suggest some are buying it as an alternative bet in times of global economic uncertainty.
But critics point to its volatility, an apparent vulnerability to theft and its use in illicit purchases online.
In one of the most high-profile scandals to hit the currency, major Tokyo-based bitcoin exchange MtGox collapsed in 2014 after admitting that 850,000 coins – worth around $480 million at the time – had disappeared from its vaults.
Bitcoin's use on the underground Silk Road website, where users could use it to buy drugs and guns, was also presented as proof it was a bad thing.
Despite concerns, most observers believe it is unlikely to suffer heavy falls soon.
"There is no real catalyst on the horizon that is going to bring this down," said Shane Chanel, from ASR Wealth Advisers in Sydney.
Safe haven, or avoiding government scrutiny?
When US entrepreneur Bharath Rao looked around for the best place to raise money for his cryptocurrency derivatives trading business, the United States did not make his list. Instead he chose the East African island nation Seychelles to sell the trading platform's tokens.
Rao, a San Diego-based technology veteran who has worked for major Wall Street banks, is not alone.
Confronted with national regulators' intensifying scrutiny of digital currency fund-raising, known as initial coin offerings, many entrepreneurs are moving businesses to locations more welcoming to cryptocurrencies and known for low taxes.
Dozens of start-ups have flocked to Singapore, Switzerland, Eastern Europe and the Caribbean this year.
Like bitcoin, the best-known cryptocurrency created in 2009, the coins use encryption and a blockchain transaction database enabling fast and anonymous transfer of funds without centralized payment systems. The numbers compiled by cryptocurrency research firm Smith + Crown show how national regulators' attempts to curb coin sales may just shift business elsewhere.
US scrutiny is deflecting interest elsewhere
The United States leads with 34 digital currency start-up registrations so far this year, but that reflects Silicon Valley's role as a technology hub and the depth of US financial markets rather than a welcoming regulatory climate.
Singapore registered 21 entities, up from one in 2016, followed by 19 in Switzerland, up from three last year, according to Smith + Crown. Central Europe saw 14 companies registered this year, compared with one in 2016 and the Caribbean hosted 10, up from two last year.
"The data affirms our sense that Switzerland and Singapore remain go-to locations, but the US could remain for companies raising large amounts of money," said Matt Chwierut, Smith + Crown's research director.
Switzerland does not have specific rules on digital coin sales, but some parts of an offer may fall under existing regulations, the Swiss Financial Market Supervisory Authority (FINMA) said in September.
So far, four of the five largest token sales, raising a total of over $600 million, were carried out by firms registered in Zug, a low-tax region south of Zurich known as the "crypto-valley" of the world.
In contrast, China and South Korea banned digital coin sales this year; and regulators in the United States, Malaysia, Dubai, United Kingdom and Germany warned investors that current scant oversight exposed them to risks of fraud, hacking or theft.
Regulators are watching closely
Soaring registrations in "friendly" jurisdictions show how hard it is for national watchdogs to regulate digital coin sales. It is a challenge regulators begin to recognise.
"We are talking to other regulators, and we know that there are a lot of bilateral discussions taking place," the Dubai Financial Services Authority said.
The US Securities Exchange Commission have declined to comment about the migration of coin issuers to remote jurisdictions.
The United Kingdom's Financial Conduct Authority and Securities Commission Malaysia say that digital coin sales are high-risk, speculative investments and that retail investors should be aware of that.
A spokesman for Germany's Federal Financial Supervisory Authority (BaFin) says "hopping" within the European Union would be "largely futile" since the EU supervisory authority has adopted the same stance as BaFin on the issue.
The Dubai regulator pointed out that seeking out friendly jurisdictions was not unusual, but regulators still needed to warn about the inherent risks in digital coin sales.
Is it even money?
In the US, the SEC's July 25 ruling that digital coins should be regulated as securities had a short-lived chilling effect on the cryptocurrency market.
Short-lived, because many US startups thought they could avoid such scrutiny by selling "utility tokens," which gave buyers access to products or services rather than a stake in the company.
Still, concerns that regulators' views might evolve, have made potential US coin issuers consider sales overseas.
"Our lawyers certainly think regulations on utility tokens could change. So for safety, the ICO should be done outside the US," said Arran Stewart, co-founder of US-based Job.com, an online employment platform which plans a token offering in the Cayman Islands in February.
Of 15 start-ups interviewed by Reuters, only one, Airfox, sold digital tokens in the United States, raising $15 million last month. Others have either carried out a coin sale overseas or are planning one.
Rao, who started Leverj, a decentralised cryptocurrency futures trading platform, said he picked Seychelles for fund-raising because of its openness to cryptocurrencies. "It has not issued anything negative on crypto," Rao said.
Gone in minutes
Digital coin sales soared to about $3.6 billion by mid-November, compared with just over $100 million in the whole of 2016, according to Autonomous NEXT, which tracks technology in the financial services industry.
Typically, issuers publish a "white paper" describing their business plan and the news of new coin sales spread via online forums and websites tracking new offers. Investors pay for them with bitcoins or ether – two of the most widely accepted cryptocurrencies – via a company's website.
The ease with which start-ups can raise millions of dollars with little scrutiny in as little as minutes, has alarmed regulators, but without a unified approach they hold little sway over that new funding market.
"It's very difficult for governments to work together in any organised fashion," said Lewis Cohen, a partner at Hogan Lovells in New York, which has a team of lawyers specialising in blockchain.
"Different jurisdictions will look at token sales through different lenses, and it would be very difficult to get on a completely harmonised place."
Nimble and lightly-regulated cryptocurrency companies can straddle borders with ease.
For example, BANKEX, which aims to convert illiquid assets into tokens to be traded on its cryptocurrency platform, is registered in Delaware and plans a coin offering in the Cayman Islands this month, said the company's CEO Igor Khmel.
Hogan Lovell's Cohen said that while it would be foolish to shut token sales down, they should be regulated, or self-regulated.
"We may need to have some guard rails," he said.
"I don't think it's really fair for legitimate platforms that are trying to create new and innovative business models to be thrown in with other less scrupulous parties who may see token sales as a way of making a fast buck."