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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 subset of digital currency that operates on blockchain networks, using cryptography to secure transactions and maintain a transparent record. Some cryptocurrencies, like Bitcoin, are designed without a central issuer, while others — particularly stablecoins such as USDC — are issued and managed by centralized entities and, in jurisdictions like the EEA, are subject to regulatory frameworks such as MiCAR (Regulation EU 2023/1114).
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.
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
(Disclaimer: References to third-party platforms, brands, or services (including Alipay, M-Pesa, PayPal, and Google Pay) are provided solely as illustrative market examples for educational purposes. Bybit EU GmbH is not affiliated with or sponsored by, and does not endorse, operate or control, these third parties or their services. Any protections applicable specifically to services provided by Bybit EU GmbH do not necessarily apply to a user's independent use of third-party platforms or services.)
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.
Cryptocurrency is a form of digital currency that operates on blockchain networks — a type of distributed ledger — using cryptography to verify transactions and ensure funds are spent only once. Unlike conventional digital money, which depends on banks or payment processors to settle transfers, cryptocurrencies can facilitate peer-to-peer transactions without those traditional intermediaries. As noted above, the degree of centralization varies: some cryptocurrencies have no central issuer, while others do.
Cryptocurrencies operate on distributed networks of nodes that validate transactions according to the protocol's rules. For many cryptocurrencies, such as Bitcoin, no single company or central bank controls issuance or transaction validation — instead, code and consensus mechanisms govern the network. However, as discussed earlier, some crypto-assets are issued and managed by identifiable entities operating within regulatory frameworks. Bitcoin (BTC) was the first cryptocurrency and, as of September 2026, remains the largest by market capitalization. A few years later, Ethereum (ETH) entered the scene, introducing smart contracts - programmable code that enabled developers to build on top of its blockchain and issue new cryptocurrencies and tokens.
Holding cryptocurrency differs from holding money in a bank account. With a self-custodial wallet, users hold their own private keys — cryptographic credentials that grant control over funds recorded on the blockchain. Losing those keys means losing access to those funds permanently. Alternatively, users can hold crypto through custodial services offered by regulated providers such as exchanges. In these cases, the provider safeguards the private keys on the user's behalf. In jurisdictions like the EEA, custodial crypto-asset service providers (CASPs) are required to verify users' identities under Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations before granting access to their services.
The comparison is not a strict either-or, cryptocurrency is a subset of digital currencies, not a separate category. When people say “digital currency,” they usually mean centrally issued electronic money, while “cryptocurrency” refers to blockchain-based, decentralized money.
Stablecoins and CBDCs blur the line between crypto and traditional digital currencies.
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 maintaining a reserve of assets — such as bank deposits and low-risk, highly liquid financial instruments (like short-term government bonds) — and issuing new stablecoins against that backing.
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.
This section is for education only and does not constitute financial adviceThe right choice between digital currencies and cryptocurrencies depends on the intended use case, risk tolerance, and individual expectations.
Everyday payments
Digital currencies from banks or mobile money are designed with everyday payments in mind and are commonly adopted.
Many e-commerce platforms accept digital currencies and e-wallets.
Some merchants already accept crypto or stablecoin payments, but support remains limited.
Cross-border payments
Traditional bank transfers and remittance services can vary in speed and cost depending on the corridor, currency, and provider — though initiatives like SEPA Instant have significantly reduced settlement times for euro transfers within the EEA.
Cryptocurrencies can offer fast cross-border settlement, though actual speed and cost depend on the blockchain protocol used, network congestion, and fee structures. Users also need to manage crypto wallets or use a custodial service to send and receive funds.
Censorship resistance and open access
Some cryptocurrencies, particularly those with decentralized network structures, can be more resistant to unilateral control, and blockchain networks are generally accessible to anyone with an internet connection.
Centralized digital currencies operate within the existing financial system, where institutions and service providers may be required by law to freeze funds, restrict access, or comply with sanctions. The degree of transaction reversibility varies depending on the payment system and jurisdiction.
Monetary policy
CBDCs could give central banks more direct tools for implementing monetary policy — for example, by improving interest rate transmission or allowing more targeted distribution of funds. However, CBDC designs vary widely across jurisdictions, and most projects are still in pilot or research phases. The ECB's digital euro project, for instance, is exploring how a CBDC could complement cash while preserving user privacy.
Cryptocurrency networks 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 is most suitable for you depends on your use case, risk profile, and applicable regulations. Researching carefully and understanding how to store cryptocurrency safely are important steps before making any purchase.
Ultimately, both are forms of digital money, but the crucial difference lies in who controls the system. Traditional digital currencies are governed by banks and central banks, while cryptocurrencies are governed by decentralized networks and code.
FAQ
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.
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”.
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.
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.
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.
Bitcoin is both a digital currency and a cryptocurrency. It uses a public blockchain and is issued through a decentralized network of nodes. Bitcoin was introduced in 2008 through his whitepaper by the pseudonymous Satoshi Nakamoto and launched in 2009.
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.This content constitutes a marketing communication from Bybit EU GmbH. 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 herein is strictly for educational and informational purposes and should not be construed as financial or investment advice.