Digital Currency

Financial transactions increasingly are taking place outside the traditional government-backed currency system via a variety of so-called digital currencies or cryptocurrencies. The best known of these, bitcoin, is accepted by a growing number of businesses large and small, with more than 2 million transactions last month. For people with a strong libertarian bent, the involvement of governments in currency is cause for alarm. To them, digital currency is a way to achieve greater freedom. For other users, protecting privacy and avoiding the costs of the traditional monetary system, such as paying fees to credit card companies, make digital currencies attractive. But these currencies also are proving risky — their values are volatile, and some parts of the system are vulnerable to hackers. Moreover, law enforcement officials say digital currency provides criminals a way to hide the proceeds of their illegal activities. International, federal and state regulators are studying these new currencies to determine how to address the issues they pose.