Virtual currencies or cryptocurrencies constitute one more link (the last one, for now) in the evolution that money has undergone throughout history. The truth is that money has existed for centuries and emerged as a natural process of evolution, initially governed by a system characterized by self-sufficiency, and switched to the exchange of goods, with the limitations that this entailed. This paved the way for the appearance of money, represented first by coins and later by banknotes. At present, with the recent appearance of virtual currencies, a step in the history of money seems to have been taken.
At the present time, the importance of cash seems to decrease, being replaced, thanks to the development of technology and the consolidation of modern financial systems, by bank or book money, which is suitable to be mobilized in multiple ways (through of cards, direct debits, transfers…), efficient and with low cost. This is also the time when the so-called “electronic money” has emerged. The book and electronic money presuppose the need for the existence of centralized infrastructures where a trusted institution settles and clears payments.
The next step in this evolution has been the appearance of virtual currencies. The European Central Bank defines them as “a digital representation of value, not issued by a central bank, credit institution or electronic money institution, which, in some circumstances, can be used as an alternative to money”[1].
Virtual currencies can follow a centralized scheme, as is the case with some online games of the “Second life” type. However, it is common for virtual currencies to operate following a decentralized pattern of organization and operation. Decentralized systems are based on blockchain for recording transactions.
One of the problems for users of virtual currencies is their high volatility, since their value can fluctuate upwards and downwards sharply, which distorts their use as a means of payment and brings them closer to the assets used to invest in them.
Although “Bitcoin” is the most popular virtual currency, there are about 500 in the world.
However, some central banks are testing their own digital currencies, which are known as Central Bank Digital Currencies (CBDC).
[1] European Central Bank (2015): “Virtual currency schemes – a further analysis”, February.
