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EU banking watchdog warns of risks from unregulated Bitcoin deposits

LONDON--People using Bitcoins are on their own when it comes to losses, the European Union's banking watchdog said on Friday in a formal warning to consumers on the risks of using unregulated online currencies.

The European Banking Authority said there was no protection or compensation for people whose “digital wallets” are hacked, a transfer of virtual money goes wrong or a platform is shut.

The warning follows similar announcements from the Bank of France and the Chinese central bank.

The EBA stopped short of telling consumers not to use online currency markets but said if they end up out of pocket there won't be a safety net like the compensation given to deposit holders when a mainstream EU bank goes bust.

“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,” EBA said in a statement.

Bitcoin is not backed by any central bank or government, or by physical assets. Its value depends on people's confidence in the currency.

It has been gaining acceptance by the general public and investment community but has yet to become an accepted form of payment on websites of major retailers such as Amazon.com.

“Cases have been reported of consumers losing significant amounts of virtual currency, with little prospect of having it returned. Also, when using virtual currency for commercial transactions, consumers are not protected by any refund rights under EU law,” said the EBA.

1 Comment
December 14, 2013    kingsolomon@
The well-informed people around the world know that the central bank of the world which controls the entire currencies of every country wants to have control of this new "currency". If their scare tactic won't work, the next step would be more than threats. Right now they are trying to find a way to either control and if they can't they'll make it illegal. How many leaders (presidents) have they "eliminated" when he tries to make his own currency for his country that this central bank of the world can not have control?
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