cryptocurrency
Federal courts and federal governmental agencies hold the view that cryptocurrency is a subcategory of virtual currency. Yet, there is no single definition of virtual currency or cryptocurrency at this time. In fact, the term cryptocurrency may be used interchangeably with other similar terms, such as digital currency, cryptoasset, or digital asset. For example, according to the United States District Court for the District of Columbia in U.S. v. 280 Virtual Currency Accounts, cryptocurrency refers to a category of virtual currency for online transactions.
As stated in Financial Crimes Enforcement Network’s (FinCEN) guidance issued on May 9, 2019, titled Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, cryptocurrency, along with digital currency, cryptoasset, digital asset, are subcategories of convertible virtual currency (CVC). According to the same guidance, CVC refers to a category of virtual currency that could function as the substitution of currency or whose value is equivalent to currency.
To understand the definition of cryptocurrency, federal courts and federal governmental agencies have focused on the functionality of cryptocurrency. The following three main functions help to define cryptocurrency:
- Medium of exchange
- Method of payment, and
- Representation of value
For example, according to FinCEN’s guidance in 2019, virtual currency can serve as a medium of exchange operating similarly to currency, but the similarity does not involve the legal tender status that official currency has. Bitcoin not only qualifies as a medium of exchange and method of payment but also as a measurement of value (See: U.S. v. Faiella and U.S. v. Iossifov).
Cryptocurrencies can also support a blockchain’s governance via voting and the access of services in the real-world (See: SEC v. Telegram).
[Written in September of 2024 by Kai Wang with the Wex Definitions Team]
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