The term 'Virtual Digital Currency' is included in the Economics edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
A Virtual Digital Currency is a form of money which is completely separate from physical cash, like coins or banknotes. What makes it a currency is that it does bear certain similar characteristics to the physical currencies. Its advantage is in the fact that borderless transfer and instant transactions become possible through it. Crypto currencies and virtual currencies are both considered to be forms of digital currencies.
Such forms of money can be utilized to purchase literal goods and services, though the purely virtual ones are often limited to specific economic systems such as social networks or online gaming communities. Another definition for Virtual Digital Currency is an Internet-based medium of exchange which permits instant and borderless transfers of ownership of real world goods and services.
As a going concern, these Virtual Digital Currency units are relatively new. Their origins lie in the heady dot come bubble heyday of the 1990s. Among the very first of these digital currencies proved to be E-gold. This currency was actually a technologically revolutionized version of a gold standard that arose in 1996. It had the backing of tangible real gold underlying it.
Liberty Reserve was another relatively early comer to the world of virtual currencies in 2006. It allowed participants to convert dollars and Euros into Liberty Reserve Dollar and Euros. Both could be exchanged back and forth without restrictions, hassles, or government regulation for a reasonable one percent charge. The two services had centralization and were heavily utilized by money laundering operations. It was inevitable that the United States Federal government would shut them down in time.
Another form of Virtual Digital Currency known as Q coins or QQ coins was so effective in China after it arose in 2005 that it created a destabilizing impact on the official Chinese exchange of the Yuan currency, thanks to speculators. These digital coins came from the Tencent QQ messaging platform.
Attention given to crypto currencies renewed the global interest in such Virtual Digital Currencies. Bitcoin the gold standard and best-loved and most traded of them came about in 2009. It has since evolved into the most heavily accepted and best-respected of the various crypto currencies.
Several of the respected international central banks and settlement bodies of the world have waded into the murky waters of these digital virtual currencies in recent years. The European Central Bank issued a report in February of 2015 entitled “Virtual currency schemes – a further analysis.” This claimed that such virtual currencies were actually digital representations of value which are not issued or guaranteed by any central bank, institution of credit, or e-money authority. The report claimed that in some instances, these virtual currencies may be employed as an alternative choice to traditional money. The prior ECB report from October of 2012 stated that such virtual currencies were unregulated digital monies that developers issued and oversaw. At the time, the ECB said these were accepted and traded among the various members of specific virtual communities.
The Swiss-based Bank for International Settlements (BIS) also issued its own “Digital Currencies” type of report in November of 2015. They defined digital currencies as assets which are represented in a digital form and which possess at least some characteristics of money. They said that these can be expressed in the denomination of a sovereign currency and overseen by an issuer who is responsible for both issuing and converting the digital money into traditionally accepted cash currencies. This means that digital currency is a representation of electronic money, or e-money, per the BIS report. They determined that any currency which is decentralized or automatically issued and which has its own units of value is a virtual currency.