Virtual currencies: passion,prospects and challenges

The purpose of this Working Paper is to provide a snapshot on virtual currencies. It focuses on convertible, decentralised virtual currencies. Taking Bitcoin as proxy, it reviews its short history and early use cases as means of payment and speculative asset, finding these customer requirements supported by an ever increasing range of service providers, many of which attract venture capital with great ease. Whilst the actual economic footprint of virtual currencies remains very limited, there is a flurry of debates as to the impact a wider adoption could have notably on the economy and on monetary policy, as well as to whether the underlying technology – in essence a distributed, global ledger not requiring the intervention of a trusted third party - couldn’t be leveraged more significantly to record transfers of assets other than money.