As a survey reveals just how many Americans still don’t know what a bitcoin is, a European watchdog group issues stern warnings about how dangerous investing in the digital currency could be. Sam Fleming of the Financial Times reported that the European Banking Authority would issue the warning. It was posted on the organization’s website today.
The warning appears to have had some effect on the price of bitcoins, which has fallen off significantly at Japanese bitcoin exchange Mt. Gox over the last couple of days.
EBA warns about bitcoins, other digital currencies
Although the bitcoin was used as the main example of digital currencies, the warning was basically a blanket statement about all digital currencies. The group warned about the risks associated with “buying, holding or trading” bitcoins and other digital currencies. It emphasized that consumers aren’t protected because these currencies are not regulated. As a result, those who use or own bitcoins and similar currencies run the risk of losing their money.
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In addition, the EBA noted that consumers who use bitcoins to buy goods or services may not be able to get their money refunded. This is because commercial transactions made using digital currencies are not covered by the refund policies of the European Union.
EBA highlights the safety of bitcoin trading
Aside from the lack of regulation on bitcoins, the group also warned that the digital wallets which are meant to hold digital currencies aren’t safe. These currencies are stored on computers, smartphones, laptops, and sometimes, even in the cloud. Hackers have broken into the cloud storage and stolen millions of dollars’ worth of bitcoins, and those who have lost their bitcoins have little or no hope of ever getting them back.
Another problem highlighted by the EBA is the anonymity involved in using digital currencies. The group states that they could be used for criminal activities like money laundering. As a result of these criminal activities, law enforcement officials could shut down exchange platforms with little or no notice. Consumers would then be unable to access their digital money or pull out their funds.
In addition, the group reminds consumers that they should find out if there are any tax liabilities in their countries which stem from holding bitcoins.