Cryptocurrency vs digital currency, what is the difference?

Cryptocurrency vs digital currency is a question of category. Digital currency is any form of money that exists electronically, and cryptocurrency is one kind of digital currency. So every cryptocurrency is a digital currency, but most digital money, such as the balance in your bank app, is not crypto.

Is cryptocurrency and digital currency the same?

No. Merriam-Webster defines cryptocurrency as a digital-only currency that typically has no central issuing or regulating body. A decentralized system records transactions and creates new units, and cryptography guards against counterfeiting. The dictionary dates the word's first known use to 2009.

Digital currency is wider. The Federal Reserve notes that most money people already hold and send electronically, such as bank deposits and payment app balances, is a liability of private institutions like commercial banks. That money is digital, but it is not cryptocurrency, because a bank keeps the ledger and owes you the funds. For how crypto networks keep their own ledger, see how does cryptocurrency work.

What is cryptocurrency vs virtual currency?

Virtual currency is an older regulatory term. In a 2015 report, the European Central Bank defined it as a digital representation of value not issued by a central bank, credit institution or e-money institution, which can sometimes be used in place of money. The ECB stressed that, unlike e-money, virtual currency carries no claim on an issuer and no promise of redemption.

That definition covers bitcoin, but it is broad enough to include schemes that are not cryptocurrencies. Earlier ECB work sorted virtual currencies into closed schemes with almost no link to the real economy, one-way schemes you can buy but not cash out, and two-way schemes that trade at floating rates. Bitcoin, which can be bought and sold for regular money, fits the two-way group.

What is cryptocurrency vs CBDC?

A central bank digital currency is digital currency issued by the state. The Fed describes a CBDC as a liability of a central bank, in the same way banknotes are. A cryptocurrency, by contrast, usually has no issuer at all and is not a claim on anyone.

The key difference is who stands behind the money. See what is a CBDC for where these projects stand, and stablecoin vs CBDC for how privately issued dollar tokens compare.

What is the difference between digital assets and cryptocurrency?

Digital asset is broader still. The IRS defines it as a digital representation of value recorded on a cryptographically secured ledger, and lists cryptocurrencies, stablecoins and NFTs as examples. The Financial Action Task Force, which sets global anti-money laundering standards, uses virtual asset for a digital representation of value that can be traded or transferred and used for payment or investment. Its definition excludes digital versions of regular currencies and securities already covered by other rules, according to the law firm Sidley Austin.

The labels shift by agency and country, so check which definition a law or tax form uses. Our guide to what is a digital asset explains the US tax term in detail.