Digital currency

Precursory ideas for digital currencies were presented in electronic payment methods such as the Sabre (travel reservation system).{{cite book | last1=Goedicke | first1=M. | last2=Neuhold | first2=E. | last3=Rannenberg | first3=K. | title=Advancing Research in Information and Communication Technology: IFIP's Exciting First 60+ Years, Views from the Technical Committees and Working Groups | publisher=Springer International Publishing | series=IFIP Advances in Information and Communication Technology | year=2021 | isbn=978-3-030-81701-5 | url=https://books.google.com/books?id=zok7EAAAQBAJ&pg=PA301 | access-date=2023-01-22 | page=301}} In 1983, a research paper titled "Blind Signatures for Untraceable Payments" by David Chaum introduced the idea of digital cash.{{Cite web|url=http://blog.koehntopp.de/uploads/Chaum.BlindSigForPayment.1982.PDF|title=Blind signatures for untraceable payments|last=Chaum|first=David|date=1982|publisher=Department of Computer Science, University of California, Santa Barbara, CA|access-date=23 May 2017|archive-date=3 September 2011|archive-url=https://web.archive.org/web/20110903023239/http://blog.koehntopp.de/uploads/Chaum.BlindSigForPayment.1982.PDF|url-status=dead}}{{Cite web |title=What Was the First Cryptocurrency? |url=https://www.investopedia.com/tech/were-there-cryptocurrencies-bitcoin/ |access-date=2022-11-18 |website=Investopedia |language=en}} In 1989, he founded DigiCash, an electronic cash company, in Amsterdam to commercialize the ideas in his research. It filed for bankruptcy in 1998.{{Cite web|url=https://www.forbes.com/forbes/1999/1101/6411390a.html|title=Requiem for a Bright Idea|website=Forbes |date=November 1, 1999 |first=Julie |last=Pitta}}{{Cite news|url=http://news.cnet.com/2100-1001-217527.html|title=Digicash files Chapter 11 |work=CNET |date=January 2, 2002}}

e-gold was the first widely used Internet money, introduced in 1996, and grew to several million users before the US Government shut it down in 2008. e-gold has been referenced to as "digital currency" by both US officials and academia.{{Cite magazine |last=Zetter |first=Kim |date=2009-06-09 |title=Bullion and Bandits: The Improbable Rise and Fall of E-Gold |url=https://www.wired.com/2009/06/e-gold/ |access-date=2020-11-19 |magazine=Wired |language=en-us}}{{Cite journal |last=Bender |first=Christian |title=A Gold Standard for the Internet? An Introductory Assessment |journal=Electronic Markets|volume=11|issue=1|citeseerx=10.1.1.543.5010 }}{{Cite journal |last=White |first=Lawrence H. |url=https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/2014/5/cato-journal-v34n2-5.pdf|title=The Troubling Suppression of Competition from Alternative Monies: The Cases of the Liberty Dollar and E-gold|journal=Cato Journal|volume=34|issue=2|pages=281–301}}{{Cite book |last=Mullan |first=Carl P. |title=The Digital Currency Challenge: Shaping Online Payment Systems through US Financial Regulations |publisher=Palgrave Macmillan |year=2014 |isbn=978-1137382559 |location=New York |pages=20–29}}{{Cite web |date=2006-09-21 |title=Deleting Commercial Pornography Sites From The Internet: The U.S. Financial Industry's Efforts To Combat This Problem |url=https://www.govinfo.gov/content/pkg/CHRG-109hhrg31467/html/CHRG-109hhrg31467.htm |access-date=2020-11-19 |website=www.govinfo.gov}} In 1997, Coca-Cola offered buying from vending machines using mobile payments.{{Cite web|url=http://www.nearfieldcommunication.org/payment-systems.html|title=History of Mobile & Contactless Payment Systems}} PayPal launched its USD-denominated service in 1998. In 2009, bitcoin was launched, which marked the start of decentralized blockchain-based digital currencies with no central server, and no tangible assets held in reserve. Also known as cryptocurrencies, blockchain-based digital currencies proved resistant to attempt by government to regulate them, because there was no central organization or person with the power to turn them off.{{cite magazine |last1=Finley |first1=Klint |title=After 10 Years, Bitcoin Has Changed Everything—And Nothing |url=https://www.wired.com/story/after-10-years-bitcoin-changed-everything-nothing/ |access-date=9 November 2018 |magazine=Wired |date=31 October 2018}}

Origins of digital currencies date back to the 1990s Dot-com bubble. Another known digital currency service was Liberty Reserve, founded in 2006; it lets users convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them freely with one another at a 1% fee. Several digital currency operations were reputed to be used for Ponzi schemes and money laundering, and were prosecuted by the U.S. government for operating without MSB licenses.{{cite news |title='Black Market Bank' Accused of Laundering $6B in Criminal Proceeds|author=Jack Cloherty |date=28 May 2013 |work=ABC News |url=https://abcnews.go.com/US/black-market-bank-accused-laundering-6b-criminal-proceeds/story?id=19275887 |access-date=28 May 2013}} Q coins or QQ coins, were used as a type of commodity-based digital currency on Tencent QQ's messaging platform and emerged in early 2005. Q coins were so effective in China that they were said to have had a destabilizing effect on the Chinese yuan currency due to speculation.{{cite news|title='China's virtual currency threatens the Yuan' |date=5 December 2006 |work=Asia Times Online |url=http://www.atimes.com/atimes/China_Business/HL05Cb01.html |archive-url=https://web.archive.org/web/20061206060159/http://www.atimes.com/atimes/China_Business/HL05Cb01.html |url-status=unfit |archive-date=6 December 2006 |access-date=14 May 2016}} Recent interest in cryptocurrencies has prompted renewed interest in digital currencies, with bitcoin, introduced in 2008, becoming the most widely used and accepted digital currency.

Digital currency is a term that refers to a specific type of electronic currency with specific properties. Digital currency is also a term used to include the meta-group of sub-types of digital currency, the specific meaning can only be determined within the specific legal or contextual case. Legally and technically, there already are a myriad of legal definitions of digital currency and the many digital currency sub-types. Combining different possible properties, there exists an extensive number of implementations creating many and numerous sub-types of digital currency. Many governmental jurisdictions have implemented their own unique definition for digital currency, virtual currency, cryptocurrency, e-money, network money, e-cash, and other types of digital currency. Within any specific government jurisdiction, different agencies and regulators define different and often conflicting meanings for the different types of digital currency based on the specific properties of a specific currency type or sub-type.

{{main|Virtual currency}}

A virtual currency has been defined in 2012 by the European Central Bank as "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community".{{Cite web|url=https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf|title=Virtual Currency Schemes|date=October 2012|website=ecb.europa.eu|access-date=1 February 2018}} The US Department of Treasury in 2013 defined it more tersely as "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency".{{Cite web|url=https://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-16-006.pdf|title=Audit Report|date=10 November 2015|website=Treasury.gov|access-date=1 February 2018}} The US Department of Treasury also stated that, "Virtual currency does not have legal-tender status in any jurisdiction."

According to the European Central Bank's 2015 "Virtual currency schemes – a further analysis" report, virtual currency is a digital representation of value, not issued by a central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money.{{Cite web|url=https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf|title=Virtual currency schemes - a further analysis|date=February 2015|website=ecb.europa.eu|access-date=1 February 2018}} In the previous report of October 2012, the virtual currency was defined as a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.

According to the Bank for International Settlements' November 2015 "Digital currencies" report, it is an asset represented in digital form and having some monetary characteristics.{{Cite web|url=https://www.bis.org/cpmi/publ/d137.pdf|title=Digital Currencies|date=November 2015|website=bis.org|access-date=1 February 2018}} Digital currency can be denominated to a sovereign currency and issued by the issuer responsible to redeem digital money for cash. In that case, digital currency represents electronic money (e-money). Digital currency denominated in its own units of value or with decentralized or automatic issuance will be considered as a virtual currency. As such, bitcoin is a digital currency but also a type of virtual currency. bitcoin and its alternatives are based on cryptographic algorithms, so these kinds of virtual currencies are also called cryptocurrencies.

Cryptocurrency is a sub-type of digital currency and a digital asset that relies on cryptography to chain together digital signatures of asset transfers, peer-to-peer networking and decentralization. In some cases a proof-of-work or proof-of-stake scheme is used to create and manage the currency.{{Cite web |url=https://arstechnica.com/business/2013/05/wary-of-bitcoin-a-guide-to-some-other-cryptocurrencies/ |title=Wary of Bitcoin? A guide to some other cryptocurrencies |work=Ars Technica |first=Ian |last=Steadman |date=May 11, 2013}}[http://www.techopedia.com/definition/27531/cryptocurrency What does Cryptocurrency mean?], technopedia, 01-07-2013{{Cite web |url=http://theconversation.com/from-your-wallet-to-google-wallet-your-digital-payment-options-14540 |title=From your wallet to Google Wallet: your digital payment options |work=The Conversation |date=May 21, 2013 |first=David |last=Tuffley}}{{cite web|title=Beyond Bitcoin: A Guide to the Most Promising Cryptocurrencies|last=Liu|first=Alec|work=Vice Motherboard |url=https://www.vice.com/en/article/beyond-bitcoin-a-guide-to-the-most-promising-cryptocurrencies/ |year=2013 |url-status=live|archive-url=https://web.archive.org/web/20131224084601/http://motherboard.vice.com/blog/beyond-bitcoin-a-guide-to-the-most-promising-cryptocurrencies|archive-date=24 December 2013 |access-date=7 January 2014}} Cryptocurrencies can allow electronic money systems to be decentralized. When implemented with a blockchain, the digital ledger system or record keeping system uses cryptography to edit separate shards of database entries that are distributed across many separate servers. The first and most popular system is bitcoin, a peer-to-peer electronic monetary system based on cryptography.

Most of the traditional money supply is bank money held on computers. They are considered digital currency in some cases. One could argue that our increasingly cashless society means that all currencies are becoming digital currencies, but they are not presented to us as such.{{cite book |title=Virtual Currency Schemes |date=October 2012 |publisher=European Central Bank |location=Frankfurt am Main |isbn=978-92-899-0862-7 |page=5 |url=http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf |chapter=1 |archive-url=https://web.archive.org/web/20121106053452/http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf |archive-date=6 November 2012 |url-status=live}}

{{Main|Electronic funds transfer}}

Currency can be exchanged electronically using debit cards and credit cards using electronic funds transfer at point of sale.

A number of electronic money systems use contactless payment transfer in order to facilitate easy payment and give the payee more confidence in not letting go of their electronic wallet during the transaction.

• In 1994 Mondex and National Westminster Bank provided an "electronic purse" to residents of Swindon
• In about 2005 Telefónica and BBVA Bank launched a payment system in Spain called Mobipay{{cite web|url=http://www.fujitsu.com/es/about/resources/case-studies/mobipay_en.html|title=Mobipay - Fujitsu Spain|access-date=23 May 2017|archive-date=26 March 2017|archive-url=https://web.archive.org/web/20170326000919/https://www.fujitsu.com/es/about/resources/case-studies/mobipay_en.html|url-status=dead}} which used simple short message service facilities of feature phones intended for pay-as-you-go services including taxis and pre-pay phone recharges via a BBVA current bank account debit.
• In January 2010, Venmo launched as a mobile payment system through SMS, which transformed into a social app where friends can pay each other for minor expenses like a cup of coffee, rent and pay a share of the restaurant bill when one has forgotten their wallet.{{Cite web|url=http://kortina.net/essays/origins-of-venmo/|title=Origins of Venmo|access-date=2015-04-23}} It is popular with college students, but has some security issues.{{Cite web|url=http://www.slate.com/articles/technology/safety_net/2015/02/venmo_security_it_s_not_as_strong_as_the_company_wants_you_to_think.html|title=Venmo Money, Venmo Problems: The mobile-payment service is trendy, easy to use, and growing fast. But is it safe? |date=26 February 2015 |first=Alison |last=Griswold |work=Slate}} It can be linked to a bank account, credit/debit card or have a loaded value to limit the amount of loss in case of a security breach. Credit cards and non-major debit cards incur a 3% processing fee.{{Cite web|url=https://venmo.com/about/fees/|title=Venmo pricing}}
• On 19 September 2011, Google Wallet released in the United States to make it easy to carry all one's credit/debit cards on a phone.{{Cite web|url=https://www.cnet.com/news/this-day-in-tech-google-wallet-launches/|title=This Day in Tech: Google Wallet launches|date=19 September 2011 |work=CNET |first=Boonsri |last=Dickinson}}
• In 2012 Ireland's O2 (owned by Telefónica) launched Easytrip to pay road tolls which were charged to the mobile phone account or prepay credit.{{cite web|url=http://www.thepaypers.com/mobile-payments/easytrip-o2-launch-mobile-toll-payments-service-in-the-republic-of-ireland/749223-16/abstract|title=Easytrip, O2 launch mobile toll payments service in the Republic of Ireland |date=15 November 2012}}
• The UK's O2 invented O2 Wallet{{cite web|url=http://www.o2.co.uk/money|title=O2 - O2 money - The O2 Wallet service closed on 31st March 2014}} at about the same time. The wallet can be charged with regular bank accounts or cards and discharged by participating retailers using a technique known as 'money messages'. The service closed in 2014.
• On 9 September 2014, Apple Pay was announced at the iPhone 6 event. In October 2014 it was released as an update to work on iPhone 6 and Apple Watch. It is very similar to Google Wallet, but for Apple devices only.{{Cite web|url=https://www.theverge.com/2014/9/9/6127587/apple-watch-works-with-apple-pay-to-replace-your-credit-cards|title=Apple Watch works with Apple Pay to replace your credit cards|date=9 September 2014 |work=The Verge |first=Dante |last=D'Orazio}}

A central bank digital currency (CBDC) is a form of universally accessible digital money in a nation and holds the same value as the country's paper currency. Like a cryptocurrency, a CBCD is held in the form of tokens. CBDCs are different from regular digital cash forms like in online bank accounts because CBDCs are established through the central bank within a country, with liabilities held by one's government, rather than from a commercial bank.{{Cite book |last1=Bordo |first1=Michael D |title=Central Bank Digital Currency and the Future of Monetary Policy |last2=Levin |first2=Andrew T |publisher=National Bureau of Economic Research |year=2017}} Approximately nine countries have already{{When|date=June 2023}} established a CBDC, with interest in the system increasing highly throughout the world. In these nations, CBDCs have been used as a form of exchange and a way for governments to try to prevent risks from occurring within their financial systems.{{Cite web |title=Countries Developing a Central Bank Digital Currency (CBDC) |url=https://www.investopedia.com/countries-developing-central-bank-digital-currency-cbdc-5221005 |access-date=2022-12-09 |website=Investopedia |language=en}}

A major problem with central bank digital currencies is deciding whether the currency should be easily trackable. If it's traceable, the government has more control than it currently does. Additionally, there's a technical aspect to consider: whether CBDCs should be based on tokens or accounts and how much anonymity users should have.{{Cite book |url=http://dx.doi.org/10.1108/ijbm |title=International Journal of Bank Marketing |publisher=Emerald|doi=10.1108/ijbm }}

{{main|Cryptocurrency}}

{{See also|List of cryptocurrencies}}

Digital Currency has been implemented in some cases as a decentralized system of any combination of currency issuance, ownership record, ownership transfer authorization and validation, and currency storage.

Per the Bank for International Settlements (BIS), "These schemes do not distinguish between users based on location, and

therefore allow value to be transferred between users across borders. Moreover, the speed of a

transaction is not conditional on the location of the payer and payee."{{Cite web|url=https://www.bis.org/cpmi/publ/d137.pdf|title=Digital Currencies|date=November 2015|website=bis.org|access-date=11 May 2020 |publisher=Bank for International Settlements |author=Committee on Payments and Market Infrastructures}}

Since 2001, the European Union has implemented the E-Money Directive "on the taking up, pursuit and prudential supervision of the business of electronic money institutions" last amended in 2009.{{cite web|url=http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32009L0110:en:NOT|title=Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC, Official Journal L 267, 10/10/2009 P. 0007 - 0017|date=16 September 2009 |access-date=30 December 2013}}

In the United States, electronic money is governed by Article 4A of the Uniform Commercial Code for wholesale transactions and the Electronic Fund Transfer Act for consumer transactions. Provider's responsibility and consumer's liability are regulated under Regulation E.{{Cite web|url=https://www.fdic.gov/news/news/financial/2009/fil09066.pdf|title=ELECTRONIC FUND TRANSFER ACT (REGULATION E)|website=Federal Deposit Insurance Corporation|access-date=23 May 2017|archive-date=30 April 2017|archive-url=https://web.archive.org/web/20170430220405/https://www.fdic.gov/news/news/financial/2009/fil09066.pdf|url-status=dead}}{{Cite web|url=http://www.occ.gov/topics/bank-operations/bit/intro-to-electronic-money-issues-appendix.pdf|title=In Introduction to Electronic Money Issues - Appendixes}}

Virtual currencies pose challenges for central banks, financial regulators, departments or ministries of finance, as well as fiscal authorities and statistical authorities.

As of 2016, over 24 countries are investing in distributed ledger technologies (DLT) with $1.4bn in investments. In addition, over 90 central banks are engaged in DLT discussions, including implications of a central bank issued digital currency.{{cite web|url=http://www.econotimes.com/BoE-explores-implications-of-blockchain-and-central-bank-issued-digital-currency-277718 |title=BoE explores implications of blockchain and central bank-issued digital currency |website=EconoTimes.com |date=2016-09-09 |access-date=2017-01-05}}

• Hong Kong's Octopus card system: Launched in 1997 as an electronic purse for public transportation, is the most successful and mature implementation of contactless smart cards used for mass transit payments. After only 5 years, 25 percent of Octopus card transactions are unrelated to transit, and accepted by more than 160 merchants.{{Cite web|url=http://www.smartcardalliance.org/resources/lib/Hong_Kong_Octopus_Card.pdf|title=Hong Kong Octopus Card|date=2005|archive-url=https://web.archive.org/web/20170215094352/http://www.smartcardalliance.org/resources/lib/Hong_Kong_Octopus_Card.pdf|archive-date=15 February 2017|url-status=dead}}
• London Transport's Oyster card system: Oyster is a plastic smartcard that can hold pay-as-you-go credit, Travelcards and Bus & Tram season tickets. An Oyster card can be used to travel on bus, Tube, tram, DLR, London Overground and most National Rail services in London.{{Cite web|url=http://www.tfl.gov.uk/fares-and-payments/oyster/what-is-oyster?intcmp=1685|title=What is Oyster?}}
• Japan's FeliCa: A contactless RFID smart card, used in a variety of ways such as in ticketing systems for public transportation, e-money, and residence door keys.{{Cite web|url=http://www.sony.net/Products/felica/about/|title="Contactless" convenience with Sony's FeliCa}}
• The Netherlands' Chipknip: As an electronic cash system used in the Netherlands, all ATM cards issued by the Dutch banks had value that could be loaded via Chipknip loading stations. For people without a bank, pre-paid Chipknip cards could be purchased at various locations in the Netherlands. As of 1 January 2015, payment can no longer be made with Chipknip.{{Cite web|url=http://www.chipknip.nl/|title=Home - Chipknip|archive-url=https://web.archive.org/web/20171129083505/https://www.chipknip.nl/|archive-date=29 November 2017|url-status=dead}}
• Belgium's Proton: An electronic purse application for debit cards in Belgium. Introduced in February 1995, as a means to replace cash for small transactions. The system was retired on 31 December 2014.{{Cite web|url=https://www.ing.be/en/retail/Pages/ProtonFAQ.aspx|archive-url=https://archive.today/20150418214450/https://www.ing.be/en/retail/Pages/ProtonFAQ.aspx|url-status=dead|archive-date=2015-04-18|title=Proton}}

In March 2018, the Marshall Islands became the first country to issue their own cryptocurrency and certify it as legal tender; the currency is called the "sovereign".{{cite news|url=https://www.reuters.com/article/us-crypto-currencies-marshall-islands/marshall-islands-to-issue-own-sovereign-cryptocurrency-idUSKCN1GC2UD|title=Marshall Islands to issue own sovereign cryptocurrency|work=Reuters |date=February 28, 2018 |first=Gertrude |last=Chavez-Dreyfuss |access-date=5 March 2018}}

The US Commodity Futures Trading Commission (CFTC) has determined virtual currencies are properly defined as commodities in 2015.{{Cite web|date=17 October 2017|title=A CFTC Primer on Virtual Currencies|url=https://www.cftc.gov/sites/default/files/idc/groups/public/documents/file/labcftc_primercurrencies100417.pdf|website=Commodity Futures Trading Commission}} The CFTC warned investors against pump and dump schemes that use virtual currencies.{{Cite web|date=15 February 2018|title=Customer Advisory: Beware Virtual Currency Pump-and-DumpSchemes|url=https://www.cftc.gov/sites/default/files/idc/groups/public/%40customerprotection/documents/file/customeradvisory_pumpdump0218.pdf|website=Commodity Futures Trading Commission}}

The US Internal Revenue Service (IRS) ruling Notice 2014-21{{Cite web|date=2014|title=US IRS Notice 2014-21|url=https://www.irs.gov/pub/irs-drop/n-14-21.pdf|website=US Internal Revenue Service}} defines any virtual currency, cryptocurrency and digital currency as property; gains and losses are taxable within standard property policies.

On 20 March 2013, the Financial Crimes Enforcement Network issued a guidance to clarify how the U.S. Bank Secrecy Act applied to persons creating, exchanging, and transmitting virtual currencies.{{cite web|date=18 March 2013|title=FIN-2013-G001: Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies|url=http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html|url-status=dead|archive-url=https://web.archive.org/web/20130319213642/http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html|archive-date=19 March 2013|access-date=29 May 2015|publisher=Financial Crimes Enforcement Network|page=6}}

In May 2014 the US Securities and Exchange Commission (SEC) "warned about the hazards of bitcoin and other virtual currencies".{{cite web|url=https://time.com/91398/sec-bitcoin-warning/|title=SEC Warns Investors on Bitcoin|date=May 7, 2014|last=Frizell|first=Sam|publisher=Time.com|access-date=December 5, 2021}}{{cite web|url=https://www.sec.gov/oiea/investor-alerts-bulletins/investoralertsia_bitcoin.html|title=INVESTOR ALERT: BITCOIN AND OTHER VIRTUAL CURRENCY-RELATED INVESTMENTS|date=May 7, 2014|work=U.S. Securities and Exchange Commission|publisher=sec.gov|access-date=December 5, 2021}}

In July 2014, the New York State Department of Financial Services proposed the most comprehensive regulation of virtual currencies to date, commonly called BitLicense. It has gathered input from bitcoin supporters and the financial industry through public hearings and a comment period until 21 October 2014 to customize the rules. The proposal per NY DFS press release "sought to strike an appropriate balance that helps protect consumers and root out illegal activity".{{Cite news |last=Dean |first=James |date=2023-10-16 |title='BitLicence' proposed to trade virtual currencies |newspaper=The Times |language=en |url=https://www.thetimes.com/travel/destinations/north-america-travel/us-travel/new-york-city/bitlicence-proposed-to-trade-virtual-currencies-pw5kmmscsx3 |access-date=2023-10-16 |issn=0140-0460}} It has been criticized by smaller companies to favor established institutions, and Chinese bitcoin exchanges have complained that the rules are "overly broad in its application outside the United States".{{cite news|author1=SydneyEmber|date=21 August 2014|title=More Comments Invited for Proposed Bitcoin Rule|work=DealBook|url=https://dealbook.nytimes.com/2014/08/21/more-comments-invited-for-proposed-bitcoin-rules/?_php=true&_type=blogs&_r=0|access-date=3 October 2014|ref=nyt814}}

The Bank of Canada has explored the possibility of creating a version of its currency on the blockchain.{{cite web|url=http://www.euromoney.com/Article/3595010/Celent-calls-on-central-banks-to-issue-their-own-digital-currencies.html |title=Celent calls on central banks to issue their own digital currencies /Euromoney magazine |website=Euromoney.com |date=2016-10-20 |access-date=2017-01-05}}

The Bank of Canada teamed up with the nation's five largest banks – and the blockchain consulting firm R3 – for what was known as Project Jasper. In a simulation run in 2016, the central bank issued CAD-Coins onto a blockchain similar Ethereum.{{cite news|url=https://www.nytimes.com/2016/10/12/business/dealbook/central-banks-consider-bitcoins-technology-if-not-bitcoin.html|title=Central Banks Consider Bitcoin's Technology, if Not Bitcoin|newspaper=The New York Times |first=Nathaniel |last=Popper |date=October 11, 2016 |access-date=2017-01-05}} The banks used the CAD-Coins to exchange money the way they do at the end of each day to settle their master accounts.

{{main|Digital renminbi}}

In 2016, Fan Yifei, a deputy governor of China's central bank, the People's Bank of China (PBOC), wrote that "the conditions are ripe for digital currencies, which can reduce operating costs, increase efficiency and enable a wide range of new applications". According to Fan Yifei, the best way to take advantage of the situation is for central banks to take the lead, both in supervising private digital currencies and in developing digital legal tender of their own.{{cite news|url=https://www.bloomberg.com/view/articles/2016-09-01/on-digital-currencies-central-banks-should-lead |title=On Digital Currencies, Central Banks Should Lead |newspaper=Bloomberg|date=September 1, 2016 |first=Fan |last=Yifei |access-date=2017-01-05}}

In October 2019, the PBOC announced that a digital renminbi would be released after years of preparation.{{cite news |url=https://asia.nikkei.com/Business/Markets/Currencies/China-s-digital-yuan-takes-shape-with-new-encryption-law |title=China's digital yuan takes shape with new encryption law |last=Tabeta |first=Shunsuke |website=Nikkei Asia |date=31 December 2019 |access-date=11 October 2020}} The version of the currency, known as DCEP (Digital Currency Electronic Payment),{{Cite web|url=https://www.hkma.gov.hk/eng/news-and-media/press-releases/2019/11/20191106-3/|title=Hong Kong Monetary Authority - Hong Kong FinTech Week 2019|last=Authority|first=Hong Kong Monetary|website=Hong Kong Monetary Authority|language=en|access-date=2019-11-10}} is based on cryptocurrency which can be "decoupled" from the banking system.{{Cite web|url=https://www.scmp.com/business/banking-finance/article/3036543/chinas-digital-currency-tsar-says-e-payment-platforms-may|title=Digital yuan tsar gives green light for tourists to go cashless in China|date=2019-11-06|website=South China Morning Post|language=en|access-date=2019-11-10}} The announcement received a variety of responses: some believe it is more about domestic control and surveillance.{{Cite news|url=https://www.reuters.com/article/us-china-markets-digital-currency-idUSKBN1XB3QP|title=China's proposed digital currency more about policing than progress|date=2019-11-01|work=Reuters|access-date=2019-11-10|language=en}}

In December 2020, the PBOC distributed {{CNY|20}} million worth of digital renminbi to the residents of Suzhou through a lottery program to further promote the government-backed digital currency. Recipients of the currency could make both offline and online purchases, expanding on an earlier trial that did not require internet connection through the inclusion of online stores in the program. Around 20,000 transactions were reported by the e-commerce company JD.com in the first 24 hours of the trial. Contrary to other online payment platforms such as Alipay or WeChat Pay, the digital currency does not have transaction fees.{{Cite news|last=Cheng|first=Jonathan|date=2020-12-27|title=China Envisions Its Digital-Currency Future, With Lotteries and a Year's Worth of Laundry|language=en-US|work=The Wall Street Journal|url=https://www.wsj.com/articles/china-envisions-its-digital-currency-future-with-lotteries-and-a-years-worth-of-laundry-11609066819|access-date=2020-12-27|issn=0099-9660}}

The Danish government proposed getting rid of the obligation for selected retailers to accept payment in cash, moving the country closer to a "cashless" economy.{{cite news|url=https://www.reuters.com/article/denmark-cash-idUSL5N0XX2ZQ20150506 |title=Denmark proposes cash-free shops to cut retail costs |work=Reuters |date=2015-05-06 |access-date=2017-01-05}} The Danish Chamber of Commerce is backing the move.{{cite web|url=http://fortune.com/2015/05/22/denmark-paper-money/ |title=Cashless society: Denmark to allow shops to ban paper money |website=Fortune |date=May 22, 2015 |first=Chris |last=Matthews |access-date=2017-01-05}} Nearly a third of the Danish population uses MobilePay, a smartphone application for transferring money.

A law passed by the National Assembly of Ecuador gives the government permission to make payments in electronic currency and proposes the creation of a national digital currency. "Electronic money will stimulate the economy; it will be possible to attract more Ecuadorian citizens, especially those who do not have checking or savings accounts and credit cards alone. The electronic currency will be backed by the assets of the Central Bank of Ecuador", the National Assembly said in a statement.{{cite web|url=http://www.ibtimes.co.uk/ecuador-create-government-run-digital-currency-it-bans-bitcoin-1458280 |title=Ecuador to Create Government-Run Digital Currency as It Bans Bitcoin |website=International Business Times|date=2014-07-25 |access-date=2017-01-05}} In December 2015, Sistema de Dinero Electrónico ("electronic money system") was launched, making Ecuador the first country with a state-run electronic payment system.{{cite web|author=Everett Rosenfeld |url=https://www.cnbc.com/2015/02/06/ecuador-becomes-the-first-country-to-roll-out-its-own-digital-durrency.html |title=Ecuador becomes the first country to roll out its own digital currency |website=Cnbc.com |date=2015-02-09 |access-date=2017-01-05}}

On 9 June 2021, the Legislative Assembly of El Salvador has become the first country in the world to officially classify bitcoin as legal currency. Starting 90 days after approval, every business must accept bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.{{Cite news|date=2021-06-09|title=Bitcoin: El Salvador makes cryptocurrency legal tender|language=en-GB|work=BBC News|url=https://www.bbc.com/news/world-latin-america-57398274|access-date=2021-07-04}}

The Dutch central bank is experimenting with a blockchain-based virtual currency called "DNBCoin".{{cite web|first=Antony |last=Peyton |url=https://www.fintechfutures.com/2016/07/blockchain-goes-dutch/ |title=Blockchain goes Dutch |website=FinTech Futures |date=4 July 2016 |access-date=2017-01-05}}

{{Unreferenced section|date=February 2022}}

The Unified Payments Interface (UPI) is a real-time payment system for instant money transfers between any two bank accounts held in participating banks in India. The interface has been developed by the National Payments Corporation of India and is regulated by the Reserve Bank of India. This digital payment system is available 24 hours a day, every day of the year. UPI is agnostic to the type of user and is used for person to person, person to business, business to person and business to business transactions.

Transactions can be initiated by the payer or the payee. To identify a bank account it uses a unique Virtual Payment Address (VPA) of the type 'accountID@bankID'. The VPA can be assigned by the bank, but can also be self specified just like an email address. The simplest and most common form of VPA is 'mobilenumber@upi'. Money can be transferred from one VPA to another or from one VPA to any bank account in a participating bank using account number and bank branch details. Transfers can be inter-bank or intra-bank.

UPI has no intermediate holding pond for money. It withdraws funds directly from the bank account of the sender and deposits them directly into the recipient's bank account whenever a transaction is requested. A sender can initiate and authorise a transfer using a two step secure process: login using a pass code → initiate → verify using a passcode. A receiver can initiate a payment request on the system to send the payer a notification or by presenting a QR code. On receiving the request, the payer can decline or confirm the payment using the same two step process: login → confirm → verify. The system is extraordinarily user friendly to the extent that even technophobes and barely literate users are adopting it in huge numbers.

Government-controlled Sberbank of Russia owns YooMoney – electronic payment service and digital currency of the same name.{{cite web|author=Andrii Degeler |url=https://thenextweb.com/insider/2012/12/19/yandex-sells-its-electronic-payment-system-to-russias-largest-bank-sberbank/ |title=Yandex Sells 75% Of Yandex.Money To Sberbank For $60M |website=Thenextweb.com |date=2012-12-19 |access-date=2017-01-05}}

Sweden is in the process of replacing all of its physical banknotes, and most of its coins by mid-2017.{{update inline|date=May 2021}} However, the new banknotes and coins of the Swedish krona will probably be circulating at about half the 2007 peak of 12,494 kronor per capita. The Riksbank is planning to begin discussions of an electronic currency issued by the central bank to which "is not to replace cash, but to act as complement to it".{{cite web|url=http://www.riksbank.se/en/Press-and-published/Speeches/2016/Skingsley-Should-the-Riksbank-issue-e-krona/|title=Skingsley: Should the Riksbank issue e-krona?|website= Riksbank |date=16 November 2016 |access-date=19 November 2017|archive-url=https://web.archive.org/web/20161221093204/http://www.riksbank.se/en/Press-and-published/Speeches/2016/Skingsley-Should-the-Riksbank-issue-e-krona/|archive-date=21 December 2016|url-status=dead}} Deputy Governor Cecilia Skingsley states that cash will continue to spiral out of use in Sweden, and while it is currently fairly easy to get cash in Sweden, it is often very difficult to deposit it into bank accounts, especially in rural areas. No decision has been currently made about the decision to create "e-krona".

In her speech,{{when|date=May 2021}} Skingsley states: "The first question is whether e-krona should be booked in accounts or whether the ekrona should be some form of a digitally transferable unit that does not need an underlying account structure, roughly like cash." Skingsley also states: "Another important question is whether the Riksbank should issue e-krona directly to the general public or go via the banks, as we do now with banknotes and coins." Other questions will be addressed like interest rates, should they be positive, negative, or zero?{{citation needed|date=May 2021}}

In 2016, a city government first accepted digital currency in payment of city fees. Zug, Switzerland, added bitcoin as a means of paying small amounts, up to {{CHF|200}}, in a test and an attempt to advance Zug as a region that is advancing future technologies. In order to reduce risk, Zug immediately converts any bitcoin received into the Swiss currency.{{cite news|url=http://www.dw.com/en/alpine-crypto-valley-pays-with-bitcoins/a-19371082? |last=Uhlig/jse |first=Christian |title=Alpine 'Crypto Valley' pays with Bitcoins |work=DW Finance |date=1 July 2016 |url-status=live |archive-url=https://archive.today/20160920160330/http://www.dw.com/en/alpine-crypto-valley-pays-with-bitcoins/a-19371082? |archive-date=20 September 2016 |access-date=20 September 2016}} Swiss Federal Railways, government-owned railway company of Switzerland, sells bitcoins at its ticket machines.{{cite web|url=https://www.sbb.ch/en/station-services/at-the-station/services-from-the-ticket-machine/bitcoin.html |title=SBB: Make quick and easy purchases with Bitcoin |website=Sbb.ch |access-date=2017-01-05}}

In 2016, the UK's chief scientific adviser, Sir Mark Walport, advised the government to consider using a blockchain-based digital currency.{{cite news|url=https://www.bbc.co.uk/news/technology-35344843 |title=Government urged to use Bitcoin-style digital ledgers|work=BBC News |first=Chris |last=Baraniuk |date=19 January 2016 |access-date=2017-01-05}}

The chief economist of Bank of England, the central bank of the United Kingdom, proposed the abolition of paper currency. The Bank has also taken an interest in blockchain.{{cite news|author=Szu Ping Chan |url=https://www.telegraph.co.uk/business/2016/09/11/inside-the-bank-of-englands-vaults-can-cash-survive/ |archive-url=https://ghostarchive.org/archive/20220112/https://www.telegraph.co.uk/business/2016/09/11/inside-the-bank-of-englands-vaults-can-cash-survive/ |archive-date=12 January 2022 |url-access=subscription |url-status=live |title=Inside the Bank of England's vaults: can cash survive? |website=Telegraph.co.uk |date=2016-09-13 |access-date=2017-01-05}}{{cbignore}} In 2016 it has embarked on a multi-year research programme to explore the implications of a central bank issued digital currency. The Bank of England has produced several research papers on the topic. One suggests that the economic benefits of issuing a digital currency on a distributed ledger could add as much as 3 percent to a country's economic output. The Bank said that it wanted the next version of the bank's basic software infrastructure to be compatible with distributed ledgers.

Government attitude dictates the tendency among established heavy financial actors that both are risk-averse and conservative. None of these offered services around cryptocurrencies and much of the criticism came from them. "The first mover among these has been Fidelity Investments, Boston based Fidelity Digital Assets LLC will provide enterprise-grade custody solutions, a cryptocurrency trading execution platform and institutional advising services 24 hours a day, seven days a week designed to align with blockchain's always-on trading cycle".{{Cite news |url=https://www.forbes.com/sites/michaeldelcastillo/2018/10/15/fidelity-launches-institutional-platform-for-bitcoin-and-ethereum/#a5ea5ae93c46 |title=Fidelity Launches Institutional Platform For Bitcoin And Ethereum |date=October 15, 2018 |first=Michael del |last=Castillo |work=Forbes}} It will work with bitcoin and Ethereum with general availability scheduled for 2019.{{update inline|date=January 2023}}

Hard electronic currency does not have the ability to be disputed or reversed when used. It is nearly impossible to reverse a transaction, justified or not. It is very similar to cash. Contrarily, soft electronic currency payments can be reversed. Usually, when a payment is reversed there is a "clearing time." A hard currency can be "softened" with a third-party service.

Many existing digital 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.{{cite web|url=https://www.wsj.com/articles/banks-mostly-avoid-providing-bitcoin-servicesthe-bitcoin-banking-blues-1387745329|title=Banks Mostly Avoid Providing Bitcoin Services|first=Robin|last=Sidel|date=22 December 2013|access-date=19 November 2017|work=The Wall Street Journal}} There are concerns that cryptocurrencies are extremely risky due to their very high volatility{{cite news |last=Tucker |first=Toph |title=Bitcoin's Volatility Problem: Why Today's Selloff Won't Be the Last |url=http://www.businessweek.com/articles/2013-12-05/bitcoins-volatility-problem-why-todays-sell-off-wont-be-the-last |archive-url=https://web.archive.org/web/20131206103431/http://www.businessweek.com/articles/2013-12-05/bitcoins-volatility-problem-why-todays-sell-off-wont-be-the-last |url-status=dead |archive-date=6 December 2013 |work=Bloomberg BusinessWeek |date=5 December 2013 |publisher=Bloomberg |access-date=6 April 2014}} and potential for pump and dump schemes.{{cite news |last=O'Grady |first=Jason D. |title=A crypto-currency primer: Bitcoin vs. Litecoin |url=https://www.zdnet.com/article/a-crypto-currency-primer-bitcoin-vs-litecoin/ |work=ZDNet |date=December 13, 2013 |access-date=6 April 2014}} Regulators in several countries have warned against their use and some have taken concrete regulatory measures to dissuade users.{{cite news |first1= Frances |last1=Schwartzkopff |first2=Peter |last2=Levring |title=Bitcoins Spark Regulatory Crackdown as Denmark Drafts Rules |newspaper=Bloomberg |url=https://www.bloomberg.com/news/2013-12-17/bitcoin-rules-drafted-in-denmark-as-regulator-warns-against-use.html |date=18 December 2013 |access-date=6 April 2014}} The non-cryptocurrencies are all centralized. As such, they may be shut down or seized by a government at any time.{{cite magazine |last=Zetter |first=Kim |title=Bullion and Bandits: The Improbable Rise and Fall of E-Gold |url=https://www.wired.com/2009/06/e-gold/ |magazine=Wired |date=9 June 2009 |access-date=6 April 2014}} The more anonymous a currency is, the more attractive it is to criminals, regardless of the intentions of its creators. bitcoin has also been criticised for its energy inefficient SHA-256-based proof of work.{{cite book |title=Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data |last=Lee |first=David |author2=Kuo Chuen |year=2015 |publisher=Academic Press |isbn=9780128023518 |page=211 |url=https://play.google.com/store/books/details?id=RfWcBAAAQBA |access-date=19 January 2017}}

According to Barry Eichengreen, an economist known for his work on monetary and financial economics, "cryptocurrencies like bitcoin are too volatile to possess the essential attributes of money. Stablecoins have fragile currency pegs that diminish their utility in transactions. And central bank digital currencies are a solution in search of a problem."{{Cite journal|last=Eichengreen|first=Barry|date=2022|title=Digital Currencies—More than a Passing Fad?|journal=Current History|volume=121|issue=831|pages=24–29|doi=10.1525/curh.2022.121.831.24|s2cid=245436834|issn=0011-3530|doi-access=free}}

• Complementary currency
• Automated clearing house
• Cashless catering
• Cashless society
• Community Exchange System
• Cryptocurrency exchange
• Cryptocurrency wallet
• Central bank digital currency
• Digital wallet
• E-commerce payment system
• Electronic Money Association
• Electronic funds transfer
• Local exchange trading system
• Payment system
• Private currency
• Privacy

{{Reflist}}

{{Commons category|Digital currency}}

{{Cryptocurrencies}}

{{Means of Exchange}}

{{Portal bar|Economics|Numismatics}}

{{Authority control}}