Management risk

DGCs, like all financial institutions and public securities, have a layer of risk in the form of the management of the issuing institution. Controls aimed to limit management risk are called "governance".
GoldMoney is the only DGC that is a government registered money service business [1].
Imitating e-gold's success, several companies claiming to be Digital Gold Currencies sprang up and failed between 1999 and 2004, including OS-Gold[5], Standard Reserve[6] and INTGold[7]. All three of these companies failed because the principals diverted deposits for other purposes instead of holding them in the form of gold.
In each of the above cases, account holders lost several million dollars worth of gold when the "institution" failed. However, the warning signs were evident from the beginning. All three of the failed companies were created and operated by people in the high-yield investment program "business", and the people who lost their funds were almost entirely HYIP players. None of the failed pseudo-DGCs had established a governance system to protect the reserves from being pillaged by management.
In contrast to those notable failures, e-gold and GoldMoney have both established governance systems that provide a high level of transparency. E-gold publishes a real-time "examiner"[8] on their website that shows the total amount of e-currency in circulation, as well as a list of the gold bars held in trust to back the value in the accounts. E-gold's governance system is self-certified, meaning that there is no third-party verification of their published figures. GoldMoney goes a significant step further by publishing quarterly third-party audits[9] of their system along with a list of the serial numbers of the bullion bars held in trust.
There are no specific financial regulations governing DGC providers, so they operate under self-regulation. DGC providers are not banks and therefore not subject to bank regulations that pertain to fractional reserve lending. However, DGCs do provide a method for transferring money from one person to another, and may therefore fall under regulations pertaining to currency transactions in some jurisdictions.
The Global Digital Currency Association (GDCA), which was founded in 2002, is a non-profit association of online currency operators, exchangers, merchants and users. The GDCA is an example of the DGC industry's attempt at self-regulation. On their website they claim their goal is to "further the interests of the industry as a whole and help with fighting fraud and other illegal activities, arbitrate disputes and act as escrow agent when and where required."[10] Of the current DGC providers, Pecunix, Liberty Reserve and eight others have become members of the association. It costs one gram of gold to file a complaint if you are not a member, and the list of filable complaints is not exhaustive. Their domain name is registered anonymously through domains by proxy, see whois