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Crypto Basics
Jun 10, 2026
8 min read
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Detailed Summary
Cryptocurrency vs. digital currency usually comes down to who controls the money.
Digital currency refers to money that exists only in electronic form, such as bank balances, mobile money, and central bank digital currencies (CBDCs). Cryptocurrency is a form of digital currency without a centralized issuer that runs on public blockchains, providing a transparent transaction record.
The core feature that distinguishes cryptocurrency from other digital currencies is its decentralized nature, meaning that no central authority controls it.
Key Takeaways
Digital currency is the umbrella term covering all kinds of electronic money including bank account balances, mobile money and CBDCs.
Cryptocurrency is one type of digital currency that relies on public blockchains and code to govern its issuance and rules instead of relying on banks.
The main difference between traditional digital currencies and cryptocurrencies is control: the former are issued and managed by banks or central banks, while the latter follow code enforced by peer‑to‑peer networks.
What is digital currency?
Digital currency is an umbrella term for all currencies that exist as electronic money and can be used for payments, value storage, or transaction settlement without ever being converted into physical form. Regulators often use the term e‑money for digital balances that are backed by fiat currency and redeemable 1:1 into cash or bank deposits
Examples of digital currencies include, but aren’t limited to:
Mobile money systems like M-Pesa and Alipay
Prepaid e-wallet balances and online payment platform balances (PayPal)
Central bank digital currencies (CBDCs) such as the digital yuan (e-CNY) and the planned digital euro
Chances are, you handle most of your payments using digital currencies. In most modern economies, most money is already digital. It exists as balances in bank ledgers and not as cash. If you have ever checked your bank balance in a mobile app or paid for a food delivery with Google Pay, you’ve touched digital currencies.
Traditional digital currencies are issued and backed by a centralized party such as a bank, a payment provider, or a central bank. As such, all transactions are stored in a central database controlled by issuers and financial institutions, inaccessible to everyday users.
Whenever you interact with traditional digital currencies, you trust that the financial institutions involved reflect balances accurately and adhere to regulations.
What is cryptocurrency?
Cryptocurrency is a form of digital currency that does not rely on a centralized issuer or the existing financial system to function. Instead, cryptocurrencies rely on cryptography and public blockchains, a type of distributed ledger, to ensure that funds are spent only once and that actors remain honest.
Cryptocurrencies exist on top of distributed networks of nodes that validate new transactions according to the protocol. There is no single company or central bank in charge. Instead, code regulates how new coins are issued and what counts as a valid transaction.
Bitcoin (BTC) was the first cryptocurrency and remains the largest by market cap to this date. A few years later, Ethereum (ETH) entered the scene, introducing smart contracts that facilitated the issuance of new cryptocurrencies on top of the Ethereum blockchain.
Since there is no centralized issuer of cryptocurrencies, holding them isn’t the same as holding money in your bank account. When storing crypto, what you actually own is a key pair that gives you control over the associated funds.
If you lose your keys, you lose access to your funds. Unlike when setting up a bank account, creating a crypto wallet is available to anyone without additional identity verification. When they transact onchain, users stay pseudonymous.
Cryptocurrency vs. digital currency: the key differences
Cryptocurrencies vs. digital currencies is not a strict either-or, as cryptocurrency is simply a subset of digital currencies. When people say “digital currency,” they usually mean centrally issued electronic money, while “cryptocurrency” refers to blockchain-based, decentralized money.
Where stablecoins and CBDCs fit in
Stablecoins and CBDCs blur the line between crypto and traditional digital currencies.
Stablecoins: crypto with fiat stability
Stablecoins are cryptocurrencies in form, stored in wallets, and exist on top of public blockchains, maintaining a stable value by tracking a reference asset such as the US Dollar or the euro. They use the same infrastructure as other cryptocurrencies and function similarly to a digital dollar as a reference asset on exchanges, for trading, payments, and storage.
Fiat-backed stablecoins achieve their stability by holding reserve assets in bank accounts and issuing new stablecoins against the backing.
CBDCs: digital fiat issued by central banks
Central bank digital currencies are a digital form of a country’s fiat currency issued directly by the central bank. CBDCs are not cryptocurrencies as they are still governed in the same way traditional fiat money is: by central banks.
Even if some CBDCs have been issued on top of blockchains, they tend to be permissioned. Most CBDCs remain in the pilot project phase, such as the digital euro.
On the spectrum, CBDCs sit closer to traditional fiat money but are digital. Once fully launched, CBDCs may become legal tender that might exist on top of blockchain but retain the same centralized governance and control structures as traditional money.
Which one is right for what?
This section is for education only and does not constitute financial advice
Whether digital currencies or cryptocurrencies are right for you depends on what you are planning to use them for, your risk tolerance, and expectations.
Everyday payments
Digital currencies from banks or mobile money are designed with everyday payments in mind and are widely adopted
Users benefit from familiar interfaces, consumer protection and ease of access
Online shopping
Digital currencies and e-wallets are widely accepted for e-commerce
Some merchants already accept crypto or stablecoin payments, but support remains limited
Cross-border payments
Traditional bank transfers and remittance services are often slow, expensive and opaque
Cryptocurrencies, especially stablecoins, offer fast, near-instant transfers but require handling crypto wallets.
Savings and store of value
Bank deposits and CBDCs are tied to fiat and less volatile day-to-day. When kept in a bank account, deposits are typically insured up to a certain limit.
Cryptocurrencies are often volatile and may not be suitable for short-term savings..
Stablecoins offer a middle ground, but still carry issuer and regulatory risk.
Censorship resistance and open access
Cryptocurrencies can be more resistant to centralized control because no single party controls the network. They’re also freely accessible to anyone with an internet connection.
Centralized digital currencies are still tied to the existing financial system and have the authority to block accounts or reverse transactions to adhere to sanctions.
Monetary policy
Central banks may use CBDCs to experiment with monetary policy, managing money supply, and track flows more accurately
Cryptocurrency networks already experiment with different supply models and encoded rules and incentives outside of the traditional monetary system.
There is no single best choice. Which type of currency makes sense for you will depend on your goals, your risk tolerance, and local regulations. Before purchasing large quantities of cryptocurrency (or any other asset), make sure to research carefully and familiarize yourself with best practices on storing them safely.
In the end, both are forms of digital money, but the crucial difference is who controls the system: banks and central banks for traditional digital currencies, versus decentralized networks and code for cryptocurrencies.
FAQ
Is cryptocurrency a digital currency?
Cryptocurrency is a type of digital currency. It exists only in electronic form and runs on a blockchain, where transactions are recorded on a distributed ledger. However, most digital currencies used in everyday banking do not use blockchains or decentralized networks. They are issued and managed by banks or payment providers and stored in centralized databases.
What are examples of digital currency?
Examples of digital currency include: online bank account and card balances, mobile money accounts like Alipay, prepaid e-wallet balances, and CBDC pilots such as the digital yuan. In most economies, most money already exists as digital entries in banking systems, even if users rarely think of it as “digital currency”.
What is the difference between digital currency and cryptocurrency?
The key difference between digital currencies and cryptocurrency is who controls issuance and manages supply. Digital currencies are governed by a centralized party, whereas crypto is not.
Is a stablecoin a cryptocurrency or a digital currency
A stablecoin is both a cryptocurrency token on a blockchain and a form of digital currency tracking the value of a reference asset, usually defined in fiat. Many stablecoins hold reserves in bank accounts or other collateral to help keep their price close to the target.
What is a CBDC?
A central bank digital currency (CBDC) is a digital form of a country or currency union’s money issued by a central bank. CBDCs are digital currencies that are centrally controlled even if some of them rely on blockchain as their underlying infrastructure.
Is Bitcoin a digital currency?
Bitcoin is both a digital currency and a cryptocurrency using a public blockchain and being issued through a decentralized network of nodes. Bitcoin was introduced in 2008 by the pseudonymous Satoshi Nakamoto and remains the largest cryptocurrency by market cap to this date.
Are digital currencies legal?
The legality of digital currencies varies by country and region. Most jurisdictions clearly allow traditional digital money from banks and licensed payment providers, as this is part of the existing financial system. Rules for cryptocurrencies and stablecoins differ more widely, ranging from open regulatory frameworks to strict restrictions or bans. Always check local laws and regulator guidance before buying or using crypto.
Investing in crypto‑assets is associated with risks, including high volatility and the potential loss of capital. Inform yourself thoroughly about the risks before making an investment decision. The information provided in this article is strictly for educational and informational purposes and should not be construed as financial or investment advice.