The economy around the world is going through a lot of changes in the last decade, and cryptocurrency is probably the most important factor. We all hear terms like e-money, digital currency, e-currency, virtual currency, cryptocurrency, etc. every day, but do we know what these terms mean and if there’s any difference? We, the lesser mortals, often use those terms interchangeably; which is merely wrong. Though all those terms could sound vaguely similar, they are distinct in definition, and they, of course, mean different things. In this article, I’ll tell you how I look cryptocurrency as e-money, do they both mean the same thing or can they be used interchangeably? Let’s find out.
What is e-money or electronic money?
Electronic money, or more popularly known as e-money or e-currency, is simply the electronic version of fiat money. If you have a physical dollar bill of $100, that’s a “cash” or physical form of fiat currency. Now, if you go to the bank teller and give him that dollar bill to deposit in your bank account, that physical version of the cash becomes electronic money, i.e., e-money or e-currency. You can take a statement of your bank account, or you can log in to your internet banking account, and there you’ll see that $100 has been added to your account balance already. Hence, that physical bill has been converted to e-money. You are now free to use that $100 amount to buy things online or transfer to somebody else. However, you are also free to convert that e-money to physical currency any time by withdrawing from any ATM booth or bank teller. Hence, e-money or e-currency is just a digital form of fiat money and can be converted into physical form at any time without any restriction, or vice versa.
And as e-money is just the digital version of fiat currency, it is issued and regulated by the central bank or government of a country and the ownership is not dependent of a password or private key, but the ownership is linked to the account holder’s identity. It is possible to lose the password of internet banking and still withdraw the real cash from the bank teller by proving the account owner’s identity.
What is a cryptocurrency?
Cryptocurrency is a virtual currency, which has no relation to fiat money whatsoever. It exists in the virtual world, and it is not convertible to real cash by any means. It is not issued or regulated by any central bank or government, instead of by some private entity only. Hence, the value of cryptocurrency can fluctuate dramatically and very frequently.
What’s the difference between cryptocurrency and e-money?
In short, two are entirely different things. The significant differences are as follows –
You cannot convert cryptocurrency into fiat currency; they are not interchangeable. You can of course “sell” cryptocurrency to get “fiat money,” or “buy” crypto using your fiat money. In that sense, cryptocurrency is more like a “commodity” or product which can be bought or sold using fiat money, and not a “currency” in its true meaning. Like if you sell your car to get some cash, does that mean your car is equivalent to that currency? No, right? The same analogy applies here too.
Cryptocurrency is not linked to your identity, but it’s connected to a private key or password. It’s very much possible for someone to “own” your cryptocurrency in case he/she finds your password or private key. As your identity is not linked with the crypto, you cannot possibly claim that cryptocurrency as your own.
Cryptocurrency exists in the virtual world only and has no physical link or trace. Hence, if somehow you destroy or wipe out the computer or server where you stored the cryptocurrency, it’s pretty much gone without any real chance of recovery. Similarly, if you lose or forget the private key or password of your crypto-wallet, there’s zero chance of recovering the cryptocurrency which is stored inside that wallet.
Cryptocurrency and e-money are not the same, and they never mean the same thing, they don’t work the same way, even vaguely. As crypto is not issued or regulated by any authority like bank or government and exists only in the virtual world without any real-world link – there’s no way it can be used as efficiently as e-money or as an alternative of e-money in the foreseeable future. Cryptocurrency has its own purpose to be used as an investment option or to make an anonymous transaction or to defeat cross-border transaction hassles.