Digital Currency

Digital Currency Term Research Paper
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Digital Currency Term Research Paper
Introduction
The year 2008 will continue to be remembered in the history of the United States. It was the same year that saw a crash in the financial market that began in the U.S. and later spread over to European and Asian countries, thus sparking the global financial crisis (Chuen, 2015). During the beginning of the same year, Bitcoin, a peer-to-peer decentralized digital currency, was developed. In November 2008, Satoshi Nakamoto first published a white paper on the Internet through the Cryptography Mailing List after the global financial crisis. This paper would be later be considered an important contribution to the world although it was not originally published in any academic journal. Nakamoto's paper has generated increasing interest due to its timing and proposals. The white paper seemed to be a direct response to a lack of confidence in a reserve currency and the central authority which control the money supply. Digital currencies, such as Bitcoin and supportive blockchain technology represent developments in financial service products and systems with the potential to facilitate more transparent and efficient global commerce. Digital currency is any form of currency which is solely available in electronic or digital form rather than the traditional currency that can be in physical form. Similar names referring to digital currency include electronic money, cybercash, or electronic currency. Since most digital currencies do not depend on intermediaries, the technology lowers transaction costs for individuals and businesses and has emerged as a major mode of processing electronic payments. Cryptocurrencies have a clear potential for continued growth due to such attributes. Like traditional currencies, virtual currencies can also attract criminal activities such as money laundering. While there have been several benefits and snags that have been underscored by supporters and critics of digital currencies, there is a legal grey area surrounding virtual currencies. While certain regulators such as the Financial Crimes Enforcement Network (FinCEN) have attempted to clarify such regulatory framework, there is a need for policymakers and regulators to further clarify legal issues surrounding virtual currencies to facilitate wider adoption of cryptocurrencies (Levin, O’Brien, & Zuben, 2015). Regulators and Congress have expressed the desire to protect citizens from fraudulent engagements that use digital currencies. However, the fact that cryptocurrency has been used by criminals to defraud the public does not digital currencies are inherently flawed or fraudulent. Regulators such as the U.S. Commodity Futures Trading Commission (CFTC) guides cryptocurrency regulation. This paper explores the history of digital currency, differentiates between soft and hard digital currency, and virtual versus traditional currencies, and centralized and decentralized systems in digital currencies. A discussion on regulatory frameworks in digital money transactions also forms an important part of this paper.
History of digital currency
David Chaum published a research paper in 1983 and introduced a novel idea of digita...