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What’s the difference between a ‘real’ currency and a ‘virtual’ currency?

The answer is: None at all. There’s only currency that is or is not legal tender.

So-called ‘real’ money, like the US Dollar, the Euro or the Canadian Loonie are the sorts of things that we think of when we think of real currency.

Virtual currencies include things like Linden Dollars, military scrips, Massachusetts’ BerkShares, New York States’ Ithaca Hours, the Iraqi Swiss Dinar, the Chiemsee Chiemgauer, credit cards, cheques, debit cards, goats, chickens and dozens of others things.

You might be surprised to see certain familiar things like plastic cards and cheques not counted among ‘real’ money. That’s because they’re not. All of the virtual currencies have a strong similarity with ‘real’ money. In the right circumstances, they’re interchangeable with ‘real’ money, and under the right conditions you can buy and sell goods and services using them as a medium of exchange, just as you might do with a US Dollar in the USA.

Where they differ is their status as legal tender. Legal tender is currency that cannot be lawfully refused as payment.

A person or an organisation can decline to accept payment by credit cards, debit cards, cheques, chickens, gemstones, bars of gold, Linden Dollars, or any other darn thing that they care to – but they cannot lawfully decline to accept payment in currency that is legal tender for their jurisdiction. (Though, of course, many countries allow a merchant to refuse service to anyone they please, so long as it doesn’t violate certain discrimination laws).

What makes a given currency ‘real’ isn’t what you can buy with it – you can get your furniture moved for a few six-packs of beer, or hire a writer for Linden Dollars, or buy books with Paypal, or obtain the services of a database guru for coffee and ice-cream – being acceptable as payment isn’t the issue.

It’s the act of law that eliminates the right to refuse it as payment for a debt. That’s what elevates any value token from the virtual to the real, regardless of what it’s made of and who manufactures it.

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