European Union banking watchdog issues warnings on bitcoins

The European Union’s banking watchdog issued a series of warnings on bitcoins on Thursday regarding the safety and investments of the virtual currency. The public official pretty much concluded that there is no government regulation (yet) and you’re on your own.

“Currently, no specific protection exists in the E.U. that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” the European Banking Authority said in a statement.

The statement added that consumers need to be aware about the risks relating to bitcoin. Some of the warnings consisted of vulnerability to hacking, misuse could lead to investigations from law enforcement and the value could drop due to its vulnerability.

“Cases have been reported of consumers losing significant amounts of virtual currency with little prospect of having it returned,” the European Banking Authority noted. “While virtual currencies continue to hit the headlines and are enjoying increasing popularity, consumers need to remain aware of the risks associated with them

One element of the announcement that should be highlighted is the fact that the banking watchdog is investigating whether or not the cryptocurrency and others like it should be regulated by a governmental body. This could be another sign that the establishment could very well hinder the potential progress of the alternative currency.

This comes as China prohibited financial institutions from facilitating transactions involving bitcoins. The statement also arises after a New York financial regulator hinted that he is considering issuing something called a “BitLicense” for businesses that participate in transactions including virtual currencies, such as bitcoins.

“Our public hearing will review the interconnection between money transmission regulations and virtual currencies,” a New York Department of Finance news release states. “Additionally, the hearing is also expected to consider the possibility and feasibility of NYDFS issuing a ‘BitLicense’ specific to virtual currency transactions and activities, which would include anti-money laundering and consumer protection requirements for licensed entities.”

Since bitcoins have garnered tremendous popularity over the past several months, governments and central banks have been paying close attention and are taking steps to ensure that bitcoins lose their anonymity because of its threat to fiat currency and the financial system.

At the time of this writing, bitcoin is trading at just under $900.

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