We've seen such innovation and creation from the virtual currency revolution that started back in 2009 with bitcoin, but we didn't think it would actually affect us in today's world. Many consumers thought bitcoin was a scam, just pretend money — until it began to be accepted as actual currency.

A new report from Technology Strategies International, Inc. (TSI), states that virtual currencies are expected to disrupt major markets in the next five years. This has the potential to revolutionize electronic transactions and the financial world. If your business doesn't know how to handle virtual currency, it may be time to learn.

What is virtual currency?

Virtual currencies are unique, usually encrypted, computer tokens that can be converted to or from fiat currency — real money — to purchase goods and services from merchants that accept virtual currencies. It's accepted as currency by some businesses, exchanged for cash by some and even purchased as an investment.

Bitcoin is an example of one type of virtual currency. But the TSI report states that more than 1,700 cryptocurrencies have been developed, and about 40 percent are considered to be active.

"The number of virtual currencies on the market has accelerated since the bitcoin's market capitalization hit $1 billion, exceeding the number of fiat currencies by June 2013," said Christie Christelis, president of TSI.

The difference between virtual and normal currency is that it is decentralized. No single institution controls it, which puts some people at ease because there's no bank controlling their money. It's supported by a peer-to-peer computer network, somewhat similar to network file-sharing systems and services, such as BitTorrent and Skype.

Virtual currency is based on a mathematical formula, which is freely available to anyone. This software behind it all is open source, meaning that anyone can look at it to make sure that it does what it's supposed to.

What about regulation?

When the Internal Revenue Service tried to regulate bitcoin, officials stated in March 2014 that the IRS will "treat virtual currencies like property such as stocks, and not currency, giving a potential boost to investors but imposing extensive record-keeping rules."

Christelis said that since virtual currencies are based on a distributed network of computer systems, the government couldn't regulate it easily.

"There's nobody to take to court and state that he/she broke the law because there's no single entity for running the protocol," he said, "The only way it could be regulated is through the on and off ramps."

He described this process from this example: If you live in Canada and you want to purchase a bitcoin from Costa Rica, you could do so because it's decentralized and available globally. The government from the area you live in cannot easily regulate exchanges from overseas.

The only regulation that could be easily enforceable would be exchanges back and forth from the same area — Canada to Canada — and by a certain class of trade (e.g., the purchase of virtual currency from fiat currency).

There's skepticism and distrust in the entire virtual currency system, which will always be there, Christelis said. But U.S. regulators have generally said it must meet existing laws regarding money laundering, fraud and other issues, while other countries have outlawed it.

"The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce," Mythili Raman, acting assistant attorney general for the DOJ's criminal division, told The Wall Street Journal last year.

How soon will you see the impact?

Christelis stated that he thinks it will take 20-30 years before the broad-based virtual currency will become a part of normal, everyday use.

"And that's even if it happens at all," he said, "If it does become an everyday occurrence, the government would lose some of its power because it can't control money supplies."

He stated, however, that segments like remittances, micropayments and online commerce could see mainstream adoption within the next five years.

The report stated that more than 50 percent of online adult consumers in the U.S., U.K. and Canada are aware of virtual currency, but interest is low because of skepticism. Still, about 1 in 5 consumers intend to make use of virtual currencies in the future, and usage is predicted to be highly adopted over the next few years, according to the report.

What does this mean for your business?

Regulators have warned money-transfer businesses they must follow the same rules as established financial institutions, including complying with anti-money-laundering laws.

"The idea of decentralized trustless systems is innovative, but the real potential for disruption comes from the ability to implement them and find compelling business models," Christelis said. "The open protocols on which these virtual currencies are based, together with the highly collaborative innovation processes at work among the different develop communities, has created an environment for innovation that it is impossible to stop it."

What should your business do? Christelis advises that you should:

• Organize and learn about virtual currency to build insight on how it could affect your business. Although it's not guaranteed to affect your business, having the understanding of the possible impact will be helpful.
• Build the skills and capacity within your business to implement virtual currencies. Have your R&D department tinker with it to see if your business could handle the impact. You'll have to devote the time and resources — in specific cases — to see if it will work.
• Start building and implementing new processes and business models to include virtual currencies. This may not happen until much later on, but having all the necessities will allow you to be one step ahead.

Newer virtual currency companies are already looking into different applications of the currency in areas such as "smart contracts, colored coins and decentralized autonomous organizations," according to the report. Christelis said the direction that virtual currencies will take will depend on government regulation.

The report suggested that businesses aren't prepared for the "disruptive wave" that is beginning to build and suggests that immediate action be taken to alleviate "the effects of moving to a decentralized trustless world."