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In Bitcoins we don't trust, says EU banking watchdog


economy

In Bitcoins we don't trust, says EU banking watchdog

The European Banking Authority has warned users the online currency Bitcoins that they should not expect help from regulators if there are problems.

It pointed out that there’s no protection or compensation for those whose “digital wallets” are hacked.

Same thing if a transfer of virtual money goes wrong or even if a digital platform that exchanges or holds virtual currencies fails or goes out of business.

Although Bitcoins are gaining increased acceptance, they is not backed by any central bank or government, or by physical assets. The value depends on people’s confidence in the currency.

The European Banking Authority stopped short of telling consumers not to use online currency markets but said if they end up out of pocket there won’t be a safety net like the compensation given to deposit holders when a mainstream EU bank goes bust.

“Cases have been reported of consumers losing significant amounts of 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.

The watchdog has been studying virtual currencies for three months and is still considering whether they can or ought to be regulated. It has powers to ban them, though questions remain over how this could be done in practice.

There are about 100 virtual currencies, with new ones appearing every week. Bitcoin is by far the best known.

The price of the bitcoin rose above $1,000 last month for the first time, extending a 400 percent surge in less than a month and fuelling concerns of a bubble.

a href=“http://www.eba.europa.eu/-/eba-warns-consumers-on-virtual-currencies” rel=“external”>European Banking Authority press release==

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