Abstract

National authorities regulating currency generally do not have direct jurisdiction over virtual currencies, to date, as they are not national fiat currencies. However, currency regulators are influencing development of digital currency in several key indirect ways. Through their authority to protect the value and integrity of national fiat currencies, they take actions affecting digital currencies claiming that such actions are necessary to protect their national currency. Additionally, as these regulators generally have the authority to control the activities of banks and other key financial institutions, they influence digital currency development and use by restricting the ability of those institutions to use or accept virtual currency. Currency regulators commonly have jurisdiction over conversion of foreign currency, and through this role, they now routinely restrict the ability of parties to conduct conversions between digital currencies and traditional national currencies. National currency regulators have also issued substantial warnings to consumers of the risks associated with digital currency use. Currency regulators often have authority over funds transmission and money transfers, and they frequently exercise that jurisdiction in the context of virtual currency use. Some government are now exploring the possibility of government controlled digital currency and of government participation in the blockchain of existing virtual currency platforms.