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.
Digital versus traditional currency
Value of digital currencies
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. Many of the current cryptocurrencies are Bitcoin-based.
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".
- 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.
- There are concerns that cryptocurrencies are extremely risky due to their very high volatility and potential for pump and dump schemes.
- Regulators in several countries have warned against their use and some have taken concrete regulatory measures to dissuade users.
- The non-cryptocurrencies are all centralized. As such, they may be shut down or seized by a government at any time.
- The more anonymous a currency is, the more attractive it is to criminals, regardless of the intentions of its creators.
- 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.
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