European banking regulators have issued a warning about the use of virtual currencies, such as Bitcoins, noting that there are no regulatory protections in this area and that there are numerous risks to using these mediums of exchange.
The European Banking Authority (EBA) said that it is issuing a warning to consumers in order to highlight the possible risks that arise when buying, holding, or trading, virtual currencies. “While the EBA is currently assessing all relevant issues associated with virtual currencies, in order to identify whether virtual currencies can and should be regulated and supervised, you are advised to familiarize yourself with the risks associated with them,” it says.
Among those risks, it notes that money may be stolen from a ‘digital wallet’; that the value of the virtual currency may fluctuate quickly, and could even disappear entirely; and, consumer could lose their money if the exchange platform they use collapses. “Virtual currencies are not regulated, so if something does go wrong you will not be able to claim compensation,” it adds.
Additionally, it notes that these currencies may be used for criminal activities, such as money laundering, which raises the risk that they may be shut down by the authorities. And, it says that transactions in these currencies may attract tax liabilities.
As a result, the EBA says that consumers should only buy virtual currencies if they are aware of the risks, and that they shouldn’t risk more “real money” than they can afford to lose. Additionally, it suggests treating a digital wallet with the same caution as a conventional wallet.