07 Jul 2014
Banks from the European Union are advised to avoid accounts in virtual currencies such as Bitcoin until a legal framework is in place, according to the European Banking Authority (EBA).
An EBA report says that the risks outweigh the advantages of using virtual currencies.
“The EBA identified in particular more than 70 risks across several categories, including risks for users, market participants, risks related to financial integrity, such as money laundering and other financial crimes, and risks for existing payments in conventional (so-called fiat) currencies,” the report says.
The EBA says a regulatory body is required to mitigate these risks, especially since peer-to-peer decentralized virtual currencies such as Bitcoins can be created and decrypted anonymously, with no IT protection for customers.
Until a regime is set up by the European Commission, the EBA “advises national supervisory authorities to discourage credit institutions, payment institutions and e-money institutions from buying, holding, or selling virtual currencies.”
As Europe debates risks and threats to the financial system, Canada became the first country to pass legislation on bitcoin usage.