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European watchdog rings alarm bells over bitcoin

Published time: December 13, 2013 16:07
A chain of block erupters used for Bitcoin mining is pictured at the Plug and Play Tech Center in Sunnyvale, California (Reuters)

A chain of block erupters used for Bitcoin mining is pictured at the Plug and Play Tech Center in Sunnyvale, California (Reuters)

The EU banking regulator has warned of a “possible risk” using virtual currency such as bitcoin, which is program code and isn't regulated by any country, as the virtual currency doesn't offer any protection to consumers or mechanism for compensation.

The European Banking Authority (EBA) is studying the opportunities and needs of the new economic sector. In case of any problems with their investment, users of virtual currencies such as bitcoin will have to solve any problems themselves.

"Currently, no specific regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business," the EBA said in a statement.

The regulator emphasized that digital currencies are facing sharp fluctuations in exchange rates. In the last month the bitcoin market price has varied between less than $300 to over $1000 per unit.

"Cases have been reported of consumers losing significant amounts of the virtual currency, with little prospect of having it returned. Also, when using virtual currency for commercial transactions, consumers are not protected by any refund rights under EU law," said the EBA.

Virtual currency has received a series of positive assessments from global supervisory authorities and prominent experts, however in recent weeks this has been replaced by worries about the increased instability. Some experts even call it a new bubble.

Earlier this month the People's Bank of China warned financial institutions to closely watch the virtual currency bitcoin, because it may increase the risk of fraud and money laundering. The increasingly popular commodity doesn’t yet threaten China’s financial system; however the action was taken as a precaution.

Bitcoin, one of about hundred virtual currencies in the world, was introduced in January, 2009 and cost then $0.05 per unit. The issue of bitcoins is carried out by authorized computers using the algorithm protected by a code. So, the quantity of bitcoins will never exceed 21 million units. The total will be gradually reached by 2140. About 57 per cent of all bitcoins are already issued, by 2017 there has to be 75 per cent.

The exchange rate of virtual currency depends only on demand. It has no value in itself; neither is it provided with physical assets or government guarantees.

Comments (21)

 

g br 19.12.2013 01:32

Dominic Blais 18.12.2013 20:35

the regulations and protections are built into the code, it's just as safe as any other fiat currency it's value is based in if we use it or not, it's better for us the rothschilds just don't want their monopoly to end so they will cry like little girls

  


th e rothchilds are probably the ones buying bitcoins at .05 and selling them to consumers at $1000. the rothchilds and other corrupt illegal families who control/stole the money supply dont give a dam about a ponzi scheme counterfeit currency, they'll trade it til its shut down.

 

Dominic Blais 18.12.2013 20:35

the regulations and protections are built into the code, it's just as safe as any other fiat currency it's value is based in if we use it or not, it's better for us the rothschilds just don't want their monopoly to end so they will cry like little girls

 

Carl Hopkinson 18.12.2013 02:29

Ha, what a joke!!! Could there be anything more risky than keeping your money in any European bank where so-called "bail-ins" are ready to go as soon as the gambling addict banksters need another infusion of "juice" stolen directly from your bank account?? Maybe they think that people forgot Cyprus already?? I hope people are not that stupid to believe this amateur-hour propaganda piece.

View all comments (21)
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