Francisco A. Laguna & Wojciech Kornacki
This is the first of a three part series on bitcoins and virtual currencies. Today, we explore how U.S. and European governmental agencies view bitcoin and analyze their shaping legal framework as well as bitcoin mining.
What is a bitcoin?
A ‘real’ bitcoin minted in 2011. One significant advantage of using bitcoins in virtual transactions over credit cards is that the cost of the transaction is significantly lower. On the coin it says in Latin ‘Strength in numbers.’ Courtesy of http://www.wikipedia.com
Bitcoin is considered a “virtual currency”. According to the Internal Revenue Service (IRS), a virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. Virtual currency is not regulated like traditional real currencies. The European Banking Authority points out that banks are not involved in virtual currency transactions, which creates risks in itself. Also, bitcoin savings are not insured, and their value could disappear overnight.
Bitcoin creates an open financial market where you deal directly with other bitcoin users. With the continued rise of the internet, people have stated that they run into the problem of how to use their real currency on-line. Paypal or Visa allow them to use real currency on-line but for a fee. Bitcoin’s fee is significantly lower, and it has its own currency. Continue reading
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