Virtual foreign currencies are a sort of unregulated, virtual, decentralized, globalized currency, which is usually bought and sold and issued by people and generally approved and used among the participants in a certain virtual network. It has no physical commodity benefit and is generally traded in pairs the following: one online currency — the base currency; one digital currency — the token currency; and a fractional unit with the actual foreign exchange. These foreign currencies have no legal tender, face value, and are not really backed by any kind of collateral, just like real estate, yellow metal, commodities, securities, and bank loans. Virtual currencies are usually free from virtually any government legislation and are generally manufactured and managed by distributed peer-to-peer applications (Drupal, Wide open Office, PHP, Java, and so forth ). The most widely used online currencies are Master card, Visa, and PayPal.

Not like a conventional currency which might be issued by a central standard bank, and guaranteed either simply by physical possessions like forex itself, or perhaps by a promises to lower back them up (like gold) on delivery, virtual currencies do not have anything to do with anything real. Virtual currencies will be “Fiat currencies” since they are certainly not backed by anything tangible. This kind of contrasts together with the traditional money system, in which a central loan company can printing money because they wish, and use it as legal tender. Virtual foreign currencies are none created nor issued by a central commercial lender.

There are many benefits associated with the electronic currencies. Digital money is highly efficient, with high purchase speed, nominal transaction expense and no cash laundering price because there is no central bestyrer, and therefore no profit and loss. Ventures are generally fast due to low cost of execution. And because virtual values are not supported or pledged by any kind of collateral, there is not any risk of arrears or fraudulence, and hence no loss in terms of money laundering.