Digital currency bitcoin is a digital currency but also a type of virtual currency. Bitcoin and its alternatives are based on cryptographic algorithms, so these kinds of virtual currencies are also called cryptocurrencies. Most of the traditional money supply is bank money held on computers. This is also considered digital currency. One could argue that our increasingly cashless society means that all currencies are becoming digital, but they are not presented to us as such. Currency can be exchanged electronically using debit cards and credit cards using electronic funds transfer at point of sale. A number of electronic money systems use contactless
Virtual currency law in the United States The Internal Revenue Service (IRS) describes Virtual Currencies (VCs) as "a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value [and] does not have legal tender status in any jurisdiction." Although, electronic payment systems have been part of American life since at least 1871 when Western Union "introduced money transfer" through the telegraph and in 1914 "introduced the first consumer charge-card", virtual currencies differ from these digital payment structures because unlike traditional digital transfers of value, virtual currencies do not represent a claim on value; rather the virtual currency