Virtual currency: digital money and international transfers

Virtual currency is any form of digital money that exists only online, including cryptocurrencies and platform-specific tokens. Here’s what it means, and how it relates to international transfers.

What is virtual currency?

According to the U.S. Commodity Futures Trading Commission⁠(opens in new window), virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status. Virtual currencies are sometimes exchanged for U.S. dollars or other currencies, but they aren’t backed or supported by any government or central bank, and their value is driven entirely by market supply and demand.

Why virtual currency matters for international money movement

Most content conflates virtual currency with cryptocurrency speculation, but the two aren’t identical:

• Cryptocurrency is one type of virtual currency, not the only type. Bitcoin and similar assets are the most widely known examples, but the broader category includes other digital tokens and representations of value as well.

• Value can be highly volatile. According to the CFTC, virtual currencies are more volatile than traditional currencies, and this volatility is amplified in leveraged products like futures contracts.

• It doesn’t have legal tender status. No government requires merchants or institutions to accept virtual currency as payment, unlike an officially issued currency.

Virtual currency and international money transfers

Some people explore virtual currency as a possible way to move money across borders, drawn by the idea of avoiding traditional banking systems entirely. Understanding how a stablecoin differs from Bitcoin⁠(opens in new window) is useful background here, since stablecoins are specifically designed to reduce the price volatility that makes other virtual currencies risky to hold even briefly, which matters when volatility, not just novelty, is the main concern about using virtual currency for a transfer.

The CFTC’s guidance notes that virtual currency cash markets are largely unregulated⁠(opens in new window) and platforms may lack the customer protections that regulated money transfer providers are required to offer, including the fee and exchange rate disclosures required under remittance transfer rules. This is a meaningful practical difference worth weighing against any potential benefit of using virtual currency for sending money internationally.

The regulatory landscape for virtual currency

Virtual currency occupies a genuinely evolving regulatory space, with different countries, and even different agencies within the same country, treating it differently depending on its specific use. In the U.S., certain federal agencies focus on virtual currency’s use as an investment or trading instrument, while other agencies focus on its use in payments and potential money laundering risk, meaning the same asset can be viewed through several different regulatory lenses simultaneously. This fragmented oversight is part of why the rules around virtual currency continue to shift, and why guidance that was accurate a year or two ago may no longer reflect the current regulatory environment.

Anyone considering virtual currency for a cross-border purpose benefits from checking the most current guidance from a relevant financial regulator, rather than relying on older articles or general assumptions, since this landscape changes relatively quickly compared with most other topics in this glossary.

Practical volatility risk in a real transfer scenario

To make the volatility risk concrete, consider sending an amount of virtual currency intended to cover a specific expense for a recipient abroad, such as a month’s rent. If the currency’s value drops significantly between when it’s sent and when the recipient converts it to their local currency, the amount available may no longer fully cover that expense, even though the same nominal amount of the virtual currency was received. This kind of gap between intended value and actual value at the time of use is a risk that doesn’t exist with a traditional currency transfer, where the amount received is fixed and known at the time of the transfer.

In Summary

Virtual currency covers a broad category of digital value representations, of which cryptocurrency is the best known type, and understanding it factually, rather than through hype or fear, helps in evaluating it clearly. For international transfers specifically, the volatility and limited regulatory protections of virtual currency markets make a traditional, regulated transfer provider a more predictable choice for most senders.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.