digitalcurrency

Digital currency refers to money that exists only in digital form and is used for online transactions. It covers a broad range of instruments, from electronic money stored on devices and digital wallets to assets secured by cryptography. Digital currency can be issued by governments or private entities and may operate on centralized ledgers or distributed networks.

Major categories include cryptocurrencies, such as Bitcoin and Ethereum, which rely on decentralized networks and do not have a central issuing authority; central bank digital currencies (CBDCs), which are digital forms of a country’s fiat money issued by the central bank; and digital money or e-money issued by banks or payment providers that typically function on centralized systems. Stablecoins, pegged to fiat currencies or other assets, are another subset designed to reduce price volatility.

Use cases include consumer payments, remittances, and cross-border settlements, with the potential to offer faster processing, lower costs, and broader financial inclusion. CBDCs and regulated digital money may enhance payment safety and interoperability, while cryptocurrencies provide programmable money and access to new financial services. However, they also introduce volatility, custody and security considerations, and questions about privacy and illicit use.

Regulation and governance of digital currencies vary by jurisdiction but commonly involve anti-money laundering requirements, know-your-customer rules, consumer protection standards, and taxation. Supervisory authorities, central banks, and financial regulators monitor systemic risk, set standards for issuance and operation, and work toward clear legal frameworks to balance innovation with safeguards.