There are at least a dozen ways we can zap money to folks from our smartphones, maybe more, but almost all remain tight in the grip of the existing banking system, with its fees and delays and myriad regulations.

Bitcoin, the digital currency based on computer encryption techniques, was supposed to cut out all the horse-drawn-carriage-and-buggy-whip overhead of the current system and provide a sleek, cheap, speed-of-light payment network.

But as the cryptocurrency faces its third mega-crash in the past three months, it’s not working out that way. It now seems the dream of a frictionless, unregulated virtual currency may end up just that — an unattainable fantasy.

The latest embarrassment for bitcoin proponents began four days ago when its largest  exchange, Tokyo-based MtGox, suspended customer withdrawals. The exchange said a flaw in the bitcoin standard allowed fraudulent cancellations of completed transactions. Some bitcoin proponents said the flaw was in the way MtGox and other exchanges chose to confirm transactions.

The move set off a wide-ranging debate that has yet to be resolved but had a more immediate impact on the price of bitcoin: It plummeted. After holding in a range of $900 to $1,000 for most of 2014, Bitcoin prices dropped as low as $500 before recovering slightly to around $700 on Monday.

The crash was so severe at one point it prompted Joey Kunkle, founder of OptionsHawk Research, to tweet:

Technical analysis of market prices isn’t always dead on, of course. “Whether this means that bitcoin has crashed once and for all and that a bubble has popped remains to be seen,” writes my colleague, Yahoo Finance interactive editor Phil Pearlman.

It didn’t help matters on Sunday when news hit that Russia had prohibited the use of bitcoin, or any other unregulated digital currency.

"Systems for anonymous payments and cyber currencies that have gained considerable circulation — including the most well-known, bitcoin — are money substitutes and cannot be used by individuals or legal entities," the Russian Prosecutor General's Office said.

The Russian announcement follows similar moves by Chinese authorities to crack down on the use of bitcoin, a shift that instigated another crash back in December.

Ultimately, the question is whether an unregulated currency lacking centralized authority and control can exist amid powerful nation states and their financial regulatory regimes.

It’s not that bitcoin can be used to facilitate money laundering, blackmail and drug dealing – that’s also true of paper money. It’s that the authorities charged with stopping those kinds of criminal transactions, not to mention collecting taxes, will inexorably seek to impose on bitcoin the sames kinds of costly rules and limitations it was invented to disrupt.