European Central Bank, Virtual Currency Schemes (Oct. 2012) (full-text).
This paper aims to provide some clarity on virtual currencies and tries to address the issue in a structured approach. It is important to take into account that these currencies both resemble money and necessarily come with their own dedicated retail payment systems; these two aspects are covered by the term "virtual currency scheme."
This report begins by defining and classifying virtual currency schemes based on observed characteristics; these might change in future, which could affect the current definition.
Depending on their interaction with traditional, "real" money and the real economy, virtual currency schemes can be classified into three types:
- Type 1, which refers to closed virtual currency schemes, basically used in an online game;
- Type 2, which refers to virtual currency schemes that have a unidirectional flow (usually an inflow), i.e., there is a conversion rate for purchasing the virtual currency, which can subsequently be used to buy virtual goods and services and exceptionally also to buy real goods and services; and
- Type 3, which refers to virtual currency schemes that have bidirectional flows, i.e., the virtual currency acts like any other convertible currency, with two exchange rates (buy and sell), which can subsequently be used to buy virtual goods and services, and also real goods and services.