Following similar announcement by the Banque de France and the Chinese Central Bank, the European Banking Authority warned today of the risks consumers run by using virtual currencies such as Bitcoin. In a formal warning on a series of risks deriving from buying holding or trading virtual currencies such as Bitcoins, the European Banking Authority said “people using Bitcoin are on their own when it comes to losses”, stressing the risk of “violent fluctuations in electronic currencies’ value”.
Although some central banks have been positive about electronic currencies, Bitcoin is not backed by any central bank or government and depends exclusively on people’s confidence in the currency. The EBA’s notice to consumers serves as a warning: whereas it is not intended to dissuade people from using online currency markets, it does point out that, since virtual currencies are at risk of losing their value “permanently” when they become unfashionable and are supplanted by a rival currency, consumers using virtual currencies cannot rely on the same safety-net that is provided to deposit holders in mainstream EU banks.
This warning was issued to raise awareness amongst online currencies’ users in order for them to be fully conscious of the risks involved and understand the specific characteristics of these currencies. The EBA will further assess all relevant aspects associated with virtual currencies, in order to identify whether they can and should be regulated and supervised.
Please read here the European Banking Authority warning.