Cryptocurrency: A Primer
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Cryptocurrency: A Primer
Vivian A. Maese, Alan W Avery, Benjamin A. Naftalis, Stephen P Wink,
and Yvette D. Valdez
The authors discuss four key issues associated with cryptocurrency.
WHAT IS CRYPTOCURRENCY?
There is no one standard definition of cryptocurrency.' At the most basic
level cryptocurrency-or digital currency or virtual currency-is a medium of
exchange that functions like money (in that it can be exchanged for goods and
services) but, unlike traditional currency, is untethered to, and independent
from, national borders, central banks, sovereigns, or fiats. In other words, it
. Vivian A. Maese (vivian.maese@lw.com), Alan W. Avery (alan.avery@lw.com), and Stephen
P. Wink (stephen.wink@lw.com) are partners at Latham & Watkins LLP and members of the
Corporate Department and Financial Institutions Industry Group. Benjamin A. Naftalis
(benjamin.naftalis@lw.com) is a partner at the firm and a member of the White Collar Defense
& Investigations Practice and Financial Institutions Industry Group. Yvette D. Valdez
(yvette.valdez@lw.com) is counsel at the firm and a member of the Corporate Department, the
Financial Institutions Industry Group, and the Derivatives Practice.
1 For instance, in 2012, the European Central Bank defined virtual currency as a type of
unregulated, digital money, which is issued and usually controlled by its developers, and used and
accepted among the members of a specific virtual community. European Central Bank, Virtual
Currency Schemes 13 (October 2012), http://www.ecb.europa.eu/pub/pdf/other/
virtualcurrencysch emes201210en.pdf. In 2013, the Financial Crimes Enforcement Network
(FinCEN), a bureau of the US Treasury, defined virtual currency as a medium of exchange that
operates like a currency in some environments, but does not have all the attributes of real
currency. FinCEN, Department of the Treasury, Application of FinCEN's Regulations to
Persons Administering, Exchanging, or Using Virtual Currencies 1 (March 18, 2013),
https://www.fincen.gov/statutes-regs/guidance/pdf/FIN-2013-GOO1.pdf. In 2014, the European
Banking Authority defined virtual currency as a digital representation of value that is neither
issued by a central bank or a public authority, nor necessarily attached to a [fiat currency], but
is accepted by natural or legal persons as a means of payment and can be transferred, stored or
traded electronically. European Banking Authority, EBA Opinion on 'virtual currencies' 5 (July
4, 2014), http://www.eba.europa.eu/documents/10180/657547/EBAOp-2014-08+Opinion+
on+Virtual+Currencies.pdf. In March 2014, the Internal Revenue Service concluded that
bitcoins and other virtual currencies are property for tax purposes-not currency. I.R.S. Notice
84-9 (March 25, 2014), http://www.irs.gov/pub/irs-drop/n-14-21.pdf. In June 2015, the New
York State Department of Financial Service's BitLicense defined virtual currency as any type of
digital unit that is used as a medium of exchange or a form of digitally stored value. Virtual
Currency shall be broadly construed to include digital units of exchange that (i) have a centralized
repository or administrator; (ii) are decentralized and have no centralized repository or
administrator; or (iii) may be created or obtained by computing or manufacturing effort. N.Y.
Comp. Codes R. & Regs. tit. 23, § 200.2(p) (2015) (hereinafter BitLicense).
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Cryptocurrency: A Primer
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