Bitcoin vs. Electronic Money: Digital But Different

23 January 2014

Bitcoin vs. Electronic Money: Digital But Different

Washington, D.C., 23 January 2014: A new CGAP report released today compares the main differences between Bitcoin and electronic money (e-money). The report shows that Bitcoin as a virtual currency is markedly different from e-money and cautions regulators and policy makers not to confuse the two.

There are few similarities between Bitcoin and e-money other than both being in digital format, according to the report. While e-money is a mechanism for interacting with government-issued and regulated currencies such as dollars and euros, Bitcoin is a virtual currency that has no fiat currency counterpart. Bitcoin is based on a decentralized peer-to-peer network that can be transferred somewhat anonymously and can be highly volatile in terms of value. These characteristics of Bitcoin, while having some potential benefits, can pose considerable risks to consumers and make it a challenge for regulators.

The full report is available at CGAP.org.

View the infographic comparing Bitcoin and e-money

On the other hand, e-money is digitally issued against equal value of fiat currency, and it can be centrally regulated, usually by a central bank. The report also points out that, unlike Bitcoin, there is growing evidence that e-money schemes have helped bring people into the formal financial system, especially in developing countries through mobile phone technology.

“The current reality is that Bitcoin is still a long way off from reaching the unbanked,” notes Sarah Rotman, Financial Sector Specialist at CGAP and author of the report. “While we shouldn’t completely rule out Bitcoin’s future potential in this market, it’s very difficult to predict where Bitcoin will be in five years and if it can have any impact for the poor.”

With the current widespread attention surrounding Bitcoin, the report warns that regulatory concerns about the virtual currency could spill over to e-money and cause previously favorable regulatory progress to be retracted. It concludes that for e-money to continue to open access to the formal financial system for the world’s unbanked, continuing with proportional regulation is essential.

For more information:

Read the Report
View the Infographic

Media Contact: Kai Bucher +1 202 473 5995 [email protected]


About CGAP

Established in 1995, CGAP is a global think-tank which seeks to advance financial inclusion. Housed at the World Bank, CGAP is a collaboration of more than 30 member agencies that are united by the mission of improving the lives of poor people through better access to appropriate financial services. CGAP combines a pragmatic approach to market development with an evidence-based advocacy platform to advance poor people’s access to financial services. More at: www.cgap.org