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Virtual currency has been defined by the Department of Treasury as "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency." Virtual currencies may have single flow, such as in the case of coupons, or bidirectional flow, in which the currency can be bought with and sold back for legal tender (also called convertible currency). FinCEN has defined centralized convertible virtual currencies as convertible virtual currencies that have a "centralized repository," similar to a central bank, and has given examples of two scenarios: One where an exchanger of a virtual currency sells and accepts real money for it, which defines the exchanger as a money transmitter, subject to the US Bank Secrecy Act, and the other where the money exchanger sells convertible virtual currency indirectly to a third party account and in a way that is "not completely transparent." The Treasury has defined a decentralized currency as a "currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort." Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust. |
Instrument Item: Virtual Currency
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