Management risk
DGCs, similar to all financial organization and public securities, have a coating of risk in the type of the management of the issuing organization. Controls intended to bound management riskare called "governance".
GoldMoney is the simply DGC that is a government registered money service business.Reproduce e-gold's success, a number of companies claiming to be Digital Gold Currencies sprang up and unsuccessful between 1999 and 2004, including OS-Gold, typical Reserve and INTGold. All three of these companies unsuccessful because the primary diverted deposits for other purposes in its place of holding them in the type of gold.
In every of the beyond cases, account holders lost more than a few million dollars worth of gold while the "institution" failed. though, the warning signs were obvious from the establishment. All three of the failed corporation were produced and operated by people in the high-yield asset program "business", and the citizens who lost their funds were approximately completely HYIP players. not any of the failed pseudo-DGCs had recognized a governance system to defend the reserves from being pillaged by organization.
In dissimilarity to those prominent failures, e-gold and GoldMoney have both well-known governance systems that present a high level of clearness. E-gold publishes a real-time "examiner" on their website that demonstrate the total amount of e-currency in flow, as well as a list of the gold bars held in trust to back the significance in the accounts. E-gold's governance system is self-certified, significance that there is no third-party confirmation of their available figures. GoldMoney goes a important step additional by publishing quarterly third- party audits of their system all along with a listing of the serial numbers of the bullion bars detained in trust.
There are no exact financial regulations governing DGC supplier, so they work under self-regulation. DGC supplier are not banks and consequently not subject to bank policy that pertain to partial reserve lending. However, DGCs do offer a method for transferring money from one person to one more, and may consequently fall under policy pertaining to currency transactions in some authority.
The Global Digital Currency Association (GDCA), which was established in 2002, is a non-profit organization of online currency operators, exchangers, merchants and users. The GDCA is an instance of the DGC industry's effort at self-regulation. On their website they maintain their objective is to "additional the interests of the industry as a whole and help with combating fraud and other criminal behavior, arbitrate disputes and take action as escrow agent when and where necessary." Of the present DGC providers, Pecunix, Liberty Reserve and eight others have turn out to be members of the organization. It costs one gram of gold to file a objection if you are not a member, and the list of filable criticisms is not exhaustive. Their area name is registered in secret through domains by proxy.