Chapter I - Typology and Terminology of Virtual Currencies

Summary

TYPOLOGY AND TERMINOLOGY OF VIRTUAL CURRENCIES

INTRODUCTION

OBJECTIVES OF THE CHAPTER – The main objectives of this first chapter are to provide more background to the topic of the research, and to further demarcate its scope. This chapter will attain those objectives by first addressing some of the concerns underlying the core terminology used in this research. Second, the aim is to establish a typology for the different kinds of virtual currencies that can be found in practice. In doing so, this chapter provides further explanation and guidance concerning those types of virtual currencies in order to ensure readability of the research to a broader audience.

use in further research – The typology decided upon in this chapter will serve the further research. The broad range of virtual currencies already in existence poses clear difficulties from a regulatory perspective. On the one hand, the principle of rule of law requires legislation to be sufficiently precise and clear. On the other hand, legislation that focuses on one type of virtual currency would risk being outdated rapidly, as technological developments in the field of virtual currencies tend to move faster than legislators. As a result, if conclusions were drawn that propose the adoption of legislation for virtual currencies, such a legislative initiative would need to take into account the broad range of types of virtual currencies and their inherent differences, while at the same time ensuring sufficient precision in its scope.

Terminology – First, this chapter will focus on the term of virtual currencies itself. While ‘virtual currencies’ is the most broadly used term to address the particular developments covered by the scope of this research, that term is by no means without adversaries. By clearly addressing the matter of terminology and by stating why a particular term was chosen above others, the terminology analysis will aid to better understand the precise scope of this research.

Typology – Second, this chapter proposes a typology for virtual currencies. In seeking alignment with research already conducted in the field of virtual currencies, the basic typology formulated by the European Central Bank (ECB) will serve as the starting point. Before presenting that typology, this chapter will identify a number of practical examples of virtual currencies. Such practical framing will further clarify the particular elements and terminology of this research to a non-expert audience.