[1] In 2014, the European Banking Authority defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.
A coupon loses its face value when redeemed for an eligible asset or service (hence: flow in one direction), may be valid for only a limited time and subject to other restrictions set by the issuer.
Transacting or even holding convertible virtual currency may be illegal in particular jurisdictions and to particular national citizens at particular times and the transactor/recipient/facilitator liable for prosecution by the State.
According to the European Central Bank, virtual currencies are "generally digital", although their enduring precursor, the coupon, for example, is physical.
Ecuador is the first country attempting a government run a cryptography-free digital currency; during the introductory phase from Christmas Eve 2014 until mid February 2015 people can open accounts and change passwords.
[19][20] Estonia has been exploring various possibilities for blockchain technology, such as Estcoin and the use of crypto tokens within its e-residency program, which gives both Estonians and foreigners a digital form of identification.
On 20 March 2013, the Financial Crimes Enforcement Network issued a guidance to clarify how the US Bank Secrecy Act applied to persons creating, exchanging and transmitting virtual currencies.
[citation needed] In July 2014, the New York State Department of Financial Services proposed the most comprehensive regulation of virtual currencies to date commonly referred to as a BitLicense.
Unlike the US federal regulators it has gathered input from bitcoin supporters and the financial industry through public hearings and a comment period until October 21, 2014, to customize the rules.
The proposal, per NY DFS press release "sought to strike an appropriate balance that helps protect consumers and root out illegal activity".
[26] It has been criticized by smaller companies to favor established institutions, and Chinese bitcoin exchanges have complained that the rules are "overly broad in its application outside the United States".
[28] In a May 2019 report ECB expressed concerns that "crypto assets provide opportunity for anonymous participation in illegal activities of all sorts".