NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, April 2, 2014

Bitcoin and similar virtual currencies are computerized money not backed by any official authority. Governments haven’t given it their blessing, and they’re trying to figure out how to deal with it.

Nameless, digital wallets provide near anonymity for account holders. Bitcoin’s Bankless networks make it impossible to keep track of how exactly the money is spent. And if Bitcoin were to become popular enough in a given country, that central bank would potentially lose the ability to control the money supply — and inflation.

That makes lots of governments wary of Bitcoin. But only two have made it illegal: Iceland and Vietnam. Iceland shut the flow of incoming bitcoins, because its central bank restricts how citizens may send money abroad. Vietnam’s government declared trading in Bitcoin and other electronic currencies against the law.