A leading American Bitcoin transactions firm is expanding into the eurozone aiming to prove the virtual currency can be a mainstream, stable and viable alternative to cash.
Coinbase, which is well established in the US, has reached agreements with a European bank for its users in 13 countries to make euro-denominated money transfers.
The countries are Austria, Belgium, Cyprus, France, Finland, Greece, Italy, Latvia, Malta, the Netherlands, Portugal, Slovakia and Spain. Germany is not included because Bitcoin is defined there as the kind of investment that needs a special licence.
One of Coinbase’s founders, Fred Ehrsam, told the Financial Times it has been talking to banks in Britain about accepting sterling payments.
Currently only three percent of global Bitcoin trading is against the euro, a third is against the dollar, and 60 percent against the Chinese yuan.
Bitcoin offers far more anonymity than standard banking systems, and so is popular for illicit deals on the internet.
Meanwhile there was another warning about Bitcoin and similar digital currencies from a central bank.
The Bank of England said users may be at increasing risk of fraud and that if such currencies find widespread use they could damage Britain’s economy.
The BoE explained the finite supply of Bitcoins meant that an economy where they formed the main currency would be at risk of deflation.
The supply of currencies such as sterling or the US dollar is partly controlled by central banks, which aim to keep the amount of currency in circulation in line with the value of goods and services produced in the economy.
But Bitcoin, which was introduced in 2009 and has more than one million users world wide, is designed to have an upper limit of 21 million coins, and more than 13 million are already in circulation.
The value is highly volatile. One Bitcoin is worth about $474 (366 euros), but its value has ranged from $363 to $919 so far this year.
Unpredictable exchange rates and the prospect of rising transaction costs might limit the widespread adoption of Bitcoin and similar currencies, but a more fundamental problem was the fixed supply, the BoE said.
“The inability of the money supply to vary in response to demand would likely cause greater volatility in prices and real activity,” according to the BoE.
Demand for conventional currencies varies for a number of reasons, ranging from Christmas holidays to recessions to technological change.
The BoE said Bitcoin did not pose a threat to British financial stability at present. It estimated no more than 20,000 people in Britain had significant Bitcoin holdings, with fewer than 300 transactions a day nationwide.
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