European banking authority warns finance industry off virtual currencies.

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Financial institutions should avoid using digital currencies such as the bitcoin until further regulation is in place, the European Banking Authority (EBA) has warned.

Although the EBA has identified potential benefits offered by these currencies--for instance, financial inclusion as well as faster and cheaper transactions--it has also highlighted more than 70 associated risks, which it believes outweigh any advantages.

The authority's main concern is the decentralised nature of virtual currencies, which means that they can be created by anyone anonymously. As a result, it is urging national supervisory authorities to discourage credit, payment and e-money institutions from buying, holding or selling virtual currencies until substantial regulation is in place.

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