Virtual currencies: new forms of money?


In recent years the issuance and use of so-called virtual currencies or cryptocurrencies has multiplied. There are more than 1,500 virtual currencies in circulation. In September 2018 market transactions in virtual currencies were calculated to amount to nearly $200,000 million.

The first virtual currencies arose in 2009 as a result of recent technological developments. There are many types of virtual currencies. Although the pioneer and the most popular is Bitcoin, there are many others (the best known are litecoin, dashcoin, peercoin, dogecoin, etc.)

The characteristics of these currencies are as follows:

  • no specific issuer
  • not under the control of any government or central bank
  • global scope. They are not centralised in any geographical area or particular group
  • exchanged via the internet

You have probably asked yourself at some time whether virtual currencies are likely to replace money. No.  These currencies are not a generally accepted means of payment or exchange. In fact, the term “currency” may be misleading and, consequently, recently they tend to be referred to as virtual assets or cryptoassets.


The European Central Bank was one of the first bodies to define virtual currencies as: “a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community” (Report dated October 2012).

The definition is not unanimously accepted, since there is debate over whether cryptocurrencies are a means of payment or a means of exchange. The difference is important since depending on whether they are considered one or the other, the issuers of virtual currencies may or may not be required to have authorisation to operate.

Nowadays the EU defines cryptocurrencies in Directive (UE) 2018/843Abre en ventana nueva as a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.


The functioning of virtual currencies is hard to understand without a knowledge of new technologies. Cryptocurrencies are not attached to physical bank notes or coins.

Most are quasi-anonymous because the transactions are recorded in such a way that the users are known only by their virtual currency public addresses, and their actual identity cannot be easily ascertained. These transactions are based on blockchain technology.

Virtual currencies are issued through private entities and are denominated in their own unit of account. The value of digital currencies depends solely on the willingness of other users to acquire them.


Currently, no virtual currency is recognised as legal tender in any country.

Transactions are made without intermediaries, directly from person to person, through certain websites which are not subject to supervision since the activity in which they engage is not regulated.


Bitcoins and cryptocurrencies can generally only be used at those websites (online stores) which accept currencies of this type.

Outside the world of online shopping, there are also some physical shops which accept virtual currencies.


Virtual currencies involve significant risks for consumers.

  • High volatility. Cryptocurrencies are subject to sharp fluctuations because their value depends on the willingness of other users to purchase them. In addition, price formation is not transparent and may be manipulated.
  • Cybersecurity. The security of transactions in virtual currencies is not the same as that of transactions made via traditional payment systems. There have been many operational incidents and thefts through cyberattacks.
  • Difficulty of ensuring consumers’ rights. Consumers who purchase goods and services with virtual currencies would find it virtually impossible to enforce their rights if they had any problem with payment or with the purchased product.


Spain has not yet passed any law on cryptocurrenciesAbre en ventana nueva.

Therefore companies or platforms engaging in cryptocurrency exchange are not regulated under Spanish law, nor are they supervised in any way, nor do they belong to any deposit guarantee systems such as the Spanish Deposit Guarantee SchemeAbre en ventana nueva created by Royal Decree-Law 16/2011 of 14 October 2011.

The Banco de España, consequently, does not authorise cryptocurrency exchange companies or platforms.

The foregoing is based on a Banco de España article entitled “Virtual and local currencies: are paracurrencies the new form of money?” by María Ángeles Nieto Giménez-Montesinos and Joaquín Hernáez Molera.

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