Bitcoin vs. Electronic Money

Studying risks and benefits of Bitcoins

This Brief provides information about Bitcoin and contrasts Bitcoin with electronic money (e-money). It describes that in e-money schemes, the link between e-money and fiat currency against which it is issued remains intact, as funds are expressed in units of that currency. Fiat currency is as any legal tender designated and issued by a central authority that people are willing to accept in exchange for goods and services. Unlike fiat currency, Bitcoins are decentralized, non-inflationary, anonymous, transparent, and irrevocable. Other findings include:

  • There is more clarity around e-money, with mounting evidence that it has brought previously excluded people into the formal financial system;
  • Current realities of Bitcoin mean it is still a long way off from reaching the unbanked. Only the financially included can access the Bitcoin system through the necessary digital connections to the Internet;
  • E-money should continue to be regulated proportionately based on the size and nature of e-money transactions, continuing to open access to the formal financial system for many of the world's unbanked.

About this Publication

By Rotman, S.