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Beware of Bitcoins, European banking watchdog says

The European Banking Authority (EBA) has warned people that those who use Bitcoins are in no way protected against losses, should their accounts be hacked. It said there was no safety net, if transactions went wrong.

Referring to the results of its three-month study, the EBA banking watchdog on Friday issued a formal warning to consumers on the risks of using virtual currencies, highlighting in particular the dangers involved in dealing with Bitcoins.

The authority emphasized there were no provisions to provide protection or compensation for people whose digital wallets were hacked. Nor was there any safety net for transactions that went wrong or if a platform was shut down, it added.

"Currently, no specific regulatory protections are in place in the EU that would shield consumers from financial losses, if a platform that exchanges or holds virtual currencies fails or goes out of business," EBA officials warned.

Increasing popularity

China is the most important Bitcoin exchange market

The watchdog stressed that Bitcoin was not backed by any central bank, government or physical assets, with its rapidly changing value based solely on people's confidence in the currency.

"When using virtual currency for commercial transactions, consumers are not protected by any refund rights under EU law," the EBA said.

Right now, there are about 100 different virtual currencies in the marketplace, with new ones appearing on a weekly basis. Bitcoin is by far the best known, with its value soaring past the $1000 (730 euros) threshold last month.

hg/pfd (Reuters, dpa)

DW.DE

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