LONDON - The European Union on Friday added to a string of recent warnings about the safety of using and investing in Bitcoin, the virtual currency that is not issued by any government.
The E.U.’s banking authority said consumers needed to be aware that they were not protected through regulation when paying with Bitcoins. The digital currency is vulnerable to hackers, might lose its value and any misuse could prompt law enforcement agencies to close Bitcoin exchange platforms and keep consumers from accessing their investment, the European regulator said.
“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, adding that it was looking into whether such currencies can and should be regulated.
The warning comes after China last week restricted its banks from using Bitcoin as currency because of concerns about money laundering and a threat to financial stability. Germany said earlier this year that it would not recognize Bitcoin as a foreign currency and that gains from buying and selling Bitcoins would be taxable. Norway has been considering a similar stance.
Since its creation by anonymous programmers, in 2009, Bitcoin has surged in popularity and consumers have been using the virtual currency to pay for goods and services. But some authorities and regulators decided only recently to treat the currency as something more serious than a temporary mania.
New York state’s top financial regulator, Benjamin M. Lawsky, said in November that he would consider issuing a “BitLicense†for businesses that conduct transactions in virtual currencies like Bitcoin. At a Senate hearing last month, regulatory officials said virtual currencies could benefit the financial system but could also be abused for criminal activity.
Britain’s financial regulator has said it does not consider Bitcoin to be within its area of responsibility because the currency was not used widely enough to be considered money.
The European Banking Authority said “cases have been reported of consumers losing significant amounts of virtual currency with little prospect of having it returned.†“While virtual currencies continue to hit the headlines and are enjoying increasing popularity, consumers need to remain aware of the risks associated with them,†the European authority said. Germany and China earlier this month detained a group of people on suspicion of fraud linked to the virtual currency.
The authority also warned that consumers should “remain mindful that holding virtual currencies may have tax implications.â€
The value of Bitcoin rose beyond $1,100 in November, leaving its total worldwide value at more than $11 billion, but has dropped below $1,000 since then.
