Demystifying the Nature of Cryptocurrencies

Abstract

This chapter provides the definition of money from a generally accepted economic perspective. It discusses the characteristics of money in the context of a fiat currency system that is regulated by way of trust built on the national central banking infrastructure to protect public interest. The chapter critically discusses the characteristics of cryptocurrencies and various terminologies describing them from the perspectives of nation-state regulators and accounting standard setters. By referring to regulatory instruments, a comparison between cryptocurrency and electronic money is discussed to reconcile an aspect of confusion to many. The discussion also includes the legal status, functions and plausible accounting treatments for cryptocurrencies that are not necessarily consistent with the market’s intended use of these digital assets.