Be warned that there’s a hole in that e-wallet of yours! Will EU regulation comes in to patch things up?
The European Banking authority issue a report today advising consumers to take the dangers of cybermoney more seriously with digital thefts having exceeded $1 million and traders being entirely unprotected in a case of a virtual currency collapse.
Bitcoin and other virtual currencies have come under close scrutiny lately with both favourable and not-so-favourable treatment by national banking authorities. While the U.S. senate added bitcoin under the umbrella of traded currencies, the central bank of China prohibited that financial institutions deal in Bitcoins, while in Germany two suspects were arrested for fraud in an investigation regarding the illegal issuing of Bitcoins worth 700,000 euros ($963,000).
The EBA noted in a statement published on its website: “Should the popularity of a particular virtual currency go down, for example if another virtual currency becomes more popular, then it is quite possible for their value to drop sharply and permanently.”
The virtual currency Bitcoin emerged in 2008 and exist as software under the control of no government or central bank. The identity of the programmer or group of programmers that designed the currency, going under the name Satoshi Nakamoto, is still unknown.
The price of Bitcoins exceeded $1,000 when the U.S. law enforcement and securities agencies proposed in a Senate hearing last month that it be considered a legitimate means of exchange. Investors anticipated that the positive publicity would widen the use of digital money.
Nevertheless, prices have since dropped to around $866 on Bitstamp, a Slovenia-based online exchange. According to Bitstamp, it would cost around $10.5 to purchase all the Bitcoins currently in circulation.
The EBA, the 28-nation executive apparatus of the European Union, would have to approve of virtual currencies first in order for regualtion to go ahead. Michael Barnier, the financial services commissioner of the EU, however, said to Bloomberg that they “support the EBA warning to consumers on the risks associated with virtual currencies.”
Furthermore, the EBA noted that people who have virtual currencies in their possession may be have to pay value-added or capital tax gains.
“We recommend that, if you buy virtual currencies, you should be fully aware and understand their specific characteristics,” the report said.
