Digital currency

From Wikipedia, the free encyclopedia
  (Redirected from Digital cash)
Jump to: navigation, search

Digital currency is a form of virtual currency or medium of exchange that is electronically created and stored. Some digital currencies are cryptocurrencies for example Bitcoin, others are not like the Ven. Like traditional money these currencies can often be used to buy physical goods and services.[1]

Digital versus traditional currency[edit]

Most of the traditional money supply is bank money held on computers. Therefore, even this could be considered 'digital' currency. However, this isn't the common usage of the term.

Value of digital currencies[edit]

The value of the currencies is largely derived from speculative trading but the fungibility of mainstream digital money is rising.[dubious ][2][3]


A cryptocurrency is a type of digital token that relies on cryptography for chaining together digital signatures of token transfers, peer-to-peer networking and decentralization. In some cases a proof-of-work scheme is used to create and manage the currency.[4][5][6][7] Many of the current cryptocurrencies are Bitcoin-based.[8]

FinCen guidance[edit]

On 20 March 2013, the Financial Crimes Enforcement Network (FinCen), a bureau of the United States Department of the Treasury, issued a document providing interpretive guidance to clarify the applicability of the Bank Secrecy Act (BSA) to persons creating, exchanging and transmitting digital or "virtual currencies".[9]


  • Many of these currencies have not yet seen widespread usage, and may not be easily used or exchanged. Banks generally do not accept or offer services for them.[10]
  • There are concerns that cryptocurrencies are extremely risky due to their very high volatility[11][12] and potential for pump and dump schemes.[13]
  • Regulators in several countries have warned against their use and some have taken concrete regulatory measures to dissuade users.[14]
  • The non-cryptocurrencies are all centralized. As such, they may be shut down or seized by a government at any time.[15]
  • The more anonymous a currency is, the more attractive it is to criminals, regardless of the intentions of its creators.[15]
  • Anyone with the right skills can issue Digital Currency. It can be compared to issuing bonds with zero interest rate, no real security behind them and thus no real obligation for the issuer to pay back the amount. This means that the issuer who succeeds in selling his currency to other users, can earn a great deal of actual money at the expense of his users.

See also[edit]


  1. ^ "What is bitcoin?". CoinDesk. Retrieved 24 January 2014. 
  2. ^ Worstall, Tim. "Bitcoin Is More Like A Speculative Investment Than A Currency". Forbes. Retrieved 24 January 2014. 
  3. ^ "Watching the Rise of a Currency". Lets Talk Bitcoin. Retrieved 23 January 2014. 
  4. ^ Wary of Bitcoin? A guide to some other cryptocurrencies, ars technica, 26-05-2013
  5. ^ What does Cryptocurrency mean?, technopedia, 01-07-2013
  6. ^ From your wallet to Google Wallet: your digital payment options, The Conversation, 26-05-2013
  7. ^ Liu, Alec. "Beyond Bitcoin: A Guide to the Most Promising Cryptocurrencies". Vice Motherboard. Retrieved 2014-01-07. 
  8. ^ Digital currency-Bitcoins. 2014. Retrieved 6 April 2014. 
  9. ^ "FIN-2013-G001 : Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies". Financial Crimes Enforcement Network. 18 March 2013. 
  10. ^ Banks Mostly Avoid Providing Bitcoin Services. Lenders Don't Share Investors' Enthusiasm for the Virtual-Currency Craze
  11. ^
  12. ^ Tucker, Toph. "Bitcoin's Volatility Problem: Why Today's Selloff Won't Be the Last". Bloomberg BusinessWeek. Bloomberg. Retrieved 6 April 2014. 
  13. ^ O'Grady, Jason D. "A crypto-currency primer: Bitcoin vs. Litecoin". ZDNet. Retrieved 6 April 2014. 
  14. ^ Frances Schwartzkopff; Peter Levring (Dec 18, 2013). Bitcoins Spark Regulatory Crackdown as Denmark Drafts Rules. Bloomberg. Retrieved 6 April 2014. 
  15. ^ a b Zetter, Kim (9 June 2009). "Bullion and Bandits: The Improbable Rise and Fall of E-Gold". Wired. Retrieved 6 April 2014. 

External links[edit]