Bitcoin, a virtual equivalent to real money but without a central authority governing it, has been heralded by devotees as a trustworthy alternative to existing payment infrastructures, independent of their government and rules. But beyond the world of tech-savvy online denizens, Bitcoin remains an obscure system for regulators and financial institutions. Now they are looking at Bitcoin more closely to figure out what role, if any, they can play in its payment systems.
Bitcoin is an online currency; effectively, just data. This data can be traded against fiat currencies. Its decentralised model relies on peer-to-peer collaboration to issue money, validate, and clear and settle transactions, thereby circumventing the systems of central banks, clearing houses and banks. It is governed by software rules set by the peer-to-peer network and not by financial regulation.
