Virtual currency

Virtual currency, or virtual money, is 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. The U.S. Commodity Futures Trading Commission has warned investors against pump and dump schemes that use virtual currencies. The Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury, defined virtual currency in its guidance published in 2013. In 2014, the European Banking Authority defined virtual currency as 'a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically'. By contrast, a digital currency that is issued by a central bank is defined as 'central bank digital currency'.Ripple, Stellar Virtual currency, or virtual money, is 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. The U.S. Commodity Futures Trading Commission has warned investors against pump and dump schemes that use virtual currencies. The Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury, defined virtual currency in its guidance published in 2013. In 2014, the European Banking Authority defined virtual currency as 'a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically'. By contrast, a digital currency that is issued by a central bank is defined as 'central bank digital currency'. In 2012, the European Central Bank (ECB) defined virtual currency 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'.:13 In 2013, Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury, in contrast to its regulations defining currency as 'the coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance', also called 'real currency' by FinCEN, defined virtual currency as 'a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency'. In particular, virtual currency does not have legal tender status in any jurisdiction. In 2014, the European Banking Authority defined virtual currency as 'a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically'. In a 2013 congressional hearing on virtual currencies, Ben Bernanke said they 'have been viewed as a form of 'electronic money' or area of payment system technology that has been evolving over the past 20 years', referencing a 1995 congressional hearing on the Future of Money before the Committee on Banking and Financial Services.The Internet currency Flooz was created in 1999. The term 'virtual currency' appears to have been coined around 2009, paralleling the development of digital currencies and social gaming. Although the correct classification is 'digital currency', the U.S. government prefers and has uniformly adopted the term 'virtual currency'. The U.S. Treasury's FinCEN was first, followed by the FBI in 2012, the General Accounting Office in 2013, as well as the government agencies testifying at the November 2013 U.S. Senate hearing on bitcoin, including the Department of Homeland Security, the Securities and Exchange Commission, the Office of the Attorney General. Attributes of a real currency, as defined in 2011 in the Code of Federal Regulations, such as real paper money and real coins are simply that they act as legal tender and circulate 'customarily'. The IRS decided in March 2014, to treat bitcoin and other virtual currencies as property for tax purposes, not as currency. Some have suggested that this makes bitcoins not fungible—that is one bitcoin is not identical to another bitcoin, unlike one gallon of crude oil being identical to another gallon of crude oil—making bitcoin unworkable as a currency. Others have stated that a measure like accounting on average cost basis would restore fungibility to the currency. Virtual currencies have been called 'closed' or 'fictional currency' when they have no official connection to the real economy, for example, currencies in massively multiplayer online role-playing games such as World of Warcraft. While there may be a grey market for exchanging such currencies or other virtual assets for real-world assets, this is usually forbidden by the games' terms of service.