Bitcoin is a virtual currency without physical form or governmental authorization. It trades freely via electronic means. Although rare, bitcoin may also be transferred in person, by a laptop or tablet computer. Bitcoins come in whole or in fractional form – i.e. 0.000001 of a bitcoin is a microbit. There are a finite number of bitcoins. A limit of 21 million bitcoins can be unlocked – more than half of which have already been ‘mined.’
The number of initial bitcoin users in 2009 was small. By 2010, daily worldwide bitcoin transactions were generally under a thousand a day.1 In late 2010, the total worldwide ‘market value’ of all bitcoin first exceeded $1 million. In 2013, bitcoin is in the news on a daily basis, especially in light of heightened uncertainty toward traditional financial systems such as that resulting from the restrictive actions taken by the government of Cyprus. Interest in bitcoin also increased from fear that select governmental authorities wish to track civilian transactions. Lastly, much press attention has focused on the rise in the value (per unit) of bitcoin. In response to the increase in volume and market value, FinCEN (the Financial Crimes Enforcement Network of the U.S. Treasury) issued advisory guidance on March 18, 2013 concerning virtual currencies. The new rules became effective immediately.
Originally Published in Transaction World Magazine - July 2013
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