Bitcoin fiat money

Bitcoin fiat money

The current realities of Bitcoin mean it is still a long way off from reaching the unbanked. Only the financially included bitcoin fiat money access the Bitcoin system through the necessary digital connections to the Internet. Bitcoin has had a volatile journey since it was launched in 2009, attracting attention among conventional investors as well as the black market.

One way to comprehend virtual currency is to first understand fiat currency. Fiat currency is any legal tender designated and issued by a central authority that people are willing to accept in exchange for goods and services because it is backed by regulation and because they trust this central authority. For a new user not interested in the mining process, the most popular way to obtain Bitcoins is through a traditional exchange where fiat currency is converted into Bitcoins and then stored in a Bitcoin wallet. Wallets come in many forms, including desktop access, mobile access, and online web-based access. Each has its own risks as both desktop and mobile access are susceptible to hackers, a hard drive crash, or a lost mobile device.

Community-Managed Loan Funds: Which Ones Work? Get your basic questions about financial inclusion and microfinance answered. Mobile Money Agents in Tanzania: How Busy, How Exclusive? Community-Managed Loan Funds: Which Ones Work? The report shows that Bitcoin as a virtual currency is markedly different from e-money and cautions regulators and policy makers not to confuse the two. There are few similarities between Bitcoin and e-money other than both being in digital format, according to the report.

While e-money is a mechanism for interacting with government-issued and regulated currencies such as dollars and euros, Bitcoin is a virtual currency that has no fiat currency counterpart. Bitcoin is based on a decentralized peer-to-peer network that can be transferred somewhat anonymously and can be highly volatile in terms of value. The full report is available at CGAP. On the other hand, e-money is digitally issued against equal value of fiat currency, and it can be centrally regulated, usually by a central bank. The report also points out that, unlike Bitcoin, there is growing evidence that e-money schemes have helped bring people into the formal financial system, especially in developing countries through mobile phone technology.

Sarah Rotman, Financial Sector Specialist at CGAP and author of the report. While we shouldn’t completely rule out Bitcoin’s future potential in this market, it’s very difficult to predict where Bitcoin will be in five years and if it can have any impact for the poor. With the current widespread attention surrounding Bitcoin, the report warns that regulatory concerns about the virtual currency could spill over to e-money and cause previously favorable regulatory progress to be retracted. It concludes that for e-money to continue to open access to the formal financial system for the world’s unbanked, continuing with proportional regulation is essential.