The Legal Status of Online Currencies – Are Bitcoins the Future?

Abstract

Bitcoin has been described as a decentralised virtual currency. Virtual currencies, such as bitcoins, are a form of money and a payment system. However, being a decentralised system, there is no central issuer, authority or register-keeper. Bitcoin is unique, not because it is a virtual currency, but because it is proof of concept of a decentralized non-issued electronic currency. Regulation of virtual currencies is at a very early stage. Most regulatory regimes are not well designed to cater for this type of payment system. However, creating and protecting trust is a crucial issue in the regulation and public acceptance of new payment services. It is generally accepted that adequate regulation is a key pre-cursor to consumer acceptance of new payment methods, including mobile banking and payments. This paper examines the legal and regulatory status of virtual currencies.

Keywords: banking, payment, consumer protection, bitcoin, central bank, regulation