Feeds

Go on, buy Bitcoin. But DON'T say we didn't WARN YOU

European banking regulator: Don't come crying to us when someone steals it

Next gen security for virtualised datacentres

Buying virtual currencies, such as Bitcoin, presents a number of risks that consumers should be aware of before purchasing such assets, the European Banking Authority (EBA) has warned.

The regulator said that because virtual currency is not regulated, consumers risk losing their money by "buying, holding or trading" them.

"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.

Consumers do not have refund rights when they use virtual currencies in transactions, and they may also have to pay tax on the assets, the EBA said.

"Holding virtual currencies may have tax implications, and [consumers] should make sure that they give due consideration to whether tax liabilities apply in their country when using virtual currencies," it said.

In addition, the regulator said that there is a risk that virtual currency can be stolen by hackers, or that platforms consumers use to store the digital assets are closed down as a result of illegal activity.

"Transactions in virtual currency provide a high degree of anonymity, they may be misused for criminal activities, including money laundering," the EBA said. "This misuse could lead law enforcement agencies to close exchange platforms at short notice and prevent consumers from accessing or retrieving any funds that the platforms may be holding for them."

Bitcoin is a digital asset with a monetary value but which is currently not recognised as an official currency anywhere in the world. Some retailers accept payment by Bitcoin for goods and services, but most traders, especially in the EU, have not yet put systems in place to accept Bitcoin transactions.

A recent report by Bank of America Merrill Lynch (BAML) in the US said that Bitcoin has the potential to "become a major means of payment for e-commerce" but said that the "high volatility" of its value "is hindering its general acceptance as a means of payments for online commerce".

BAML's report said that the openness of transactions made using Bitcoin could, despite the fact they can be made anonymously, "ultimately limit its use in the black market/underworld".

"Not only is each transaction recorded on each Bitcoin, but all transactions are recorded in an online public ledger, offering a level of transparency that is not available with cash," the report said. "Such transparency offers regulators means to track potentially illicit activity."

The People's Bank of China, the country's central bank, recently banned financial and payment institutions from providing or accepting Bitcoin.

The trading of Bitcoin is not regulated within the UK or broadly across the EU currently, but technology and payments law specialist Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said recently that proposed new EU laws on payment services leave open the possibility of Bitcoin being regulated in future.

Copyright © 2013, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.