The Difference Between Cryptocurrency & Digital Currency

Cryptocurrency vs Digital Currency. Art by @MattKaneArtist

Are Digital Currency & Cryptocurrency Really Different?

Digital currency and cryptocurrency are often mistaken to be just the same thing, but that is not really the case. Digital currency and cryptocurrency have their own similarities and differences, which you’ll be able to tell by the end of this article.

Since the emergence of cryptocurrency and the mainstream acceptance that it has been getting lately, the usage of digital currencies has also increased. Due to its contactless benefit, it became the center of financial and technological advancements during the pandemic. Now, both currencies are the talk of the town, but many are still confused about them.

What is Digital Currency?

Digital currencies are the government-issued electronic version of fiat currencies. They are used for contactless transactions between parties, for example, when money is transferred electronically from one bank to another.

Central authorities and governments regulate digital currency. You use digital currencies when you make an online transfer of money from your bank account or digital wallet that holds value equivalent to fiat currency. The digital currency is changed into liquid cash when you use an ATM.

What is Cryptocurrency?

Cryptocurrency is a type of virtual currency that is secured by encryption and backed by cryptography. It uses blockchain technology and is decentralized, which means it is not controlled or regulated by authorities or governments. They do not have any existence in the real world.

Online payments and investments may both be made using cryptocurrencies like Bitcoin, Ethereum, and Litecoin. People buy Bitcoin or other cryptocurrencies and use it as a payment method and investment tool. Cryptocurrency prices fluctuate quickly since the crypto market is unstable.

Difference Between Cryptocurrency & Digital Currencies

The difference between both can be easily determined in terms of encryption, stability, usage, regulation, security, anonymity, and many more.

Digital currencies are primarily centralized and do not need encryption. At the same time, users have to be very careful and must set strong passwords in order to protect it. Furthermore, debit/credit cards are generally used to transfer or withdraw digital currencies, so a strong pin code or password should be set up.

Cryptocurrencies, on the other hand, are encrypted. For cryptocurrency trading, a bank account with digital currencies is needed. You can exchange digital currencies into cryptocurrency through a cryptocurrency exchange.

Digital currencies are fully regulated and backed by governments. To use digital currencies, users have to grant personal identification information. Whereas cryptocurrency is decentralized, no government or authority can control it. Hence, it is not regulated.

Authorities, financial agencies, and governments all over the world are trying to issue regulations regarding accepting cryptocurrency and blockchain technology, but that may take some time.

Digital currencies are used worldwide, so they are highly stable, and it is easy to manage transactions since they have a very high acceptance in the global market. Cryptocurrency is a very unstable market due to less mainstream acceptance and increased price volatility. It is gradually becoming popular, but there is still a long way to go.

When using digital currencies, the transaction information is only available to the sender, receiver, and the authorities. However, in cryptocurrencies, the data is open to the general public, but identities remain unnamed. All crypto transactions are secured on the decentralized ledger, but users can stay anonymous.

You can cancel transactions or request refunds while using digital currencies but transactions in cryptocurrencies are usually irreversible. Digital currencies have existed since the emergence of the internet. However, the first cryptocurrency, Bitcoin, appeared in 2009.

The dynamic nature of cryptocurrency and digital currency makes it difficult to differentiate between them. However, if you are using or are planning to use these payment methods, it is essential for you to know the technical aspects, similarities, and dissimilarities.

A cryptocurrency is a form of digital money, but it is very different from ordinary digital currency. Nowadays, people are investing in cryptocurrency and view it as an investment asset.

The following are some of the examples for both:

Digital currencies: Paycoin, Digital Yuan (China), money stored on debit/credit card.

Cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP).


This article explained the fundamental difference between cryptocurrencies and digital currencies. Both are electronic money, which means they do not exist in the real world, and we cannot touch them.

People can only use them for online transactions. Each one has its own unique features that people view as its advantages and disadvantages. Finally, cryptocurrencies and digital currencies both play a crucial role in the existing payment landscape.

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