Mobile payments: An EU agency has advised caution in the use of digital wallets and virtual currencies like Bitcoin.
The European Banking Authority has issued a warning on the use of virtual currencies such as Bitcoin, saying the space is largely unregulated and poses several risks for consumers.
The EBA, a EU body that coordinates banking rules amongst regulators in the 28 member states, said it was flagging the issue given the rise in media attention and “increasing popularity” of crypo-currencies and digital wallets.
Bitcoin was the only digital currency or type of electronic payment mentioned specifically by name in the organisation’s warning.
Other crypto-currencies include Litecoin, Namecoin and Peercoin; and companies such as Apple, Cashcloud, Digicash, Google and PayPal offer digital wallets.
On Friday, the EBA said that: “consumers are not protected through regulation when using virtual currencies as a means of payment and may be at risk of losing their money”.
“Consumers should be aware that exchange platforms tend to be unregulated and are not banks that hold their virtual currency as a deposit. Currently, no specific regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” the agency stated.
“Not impervious to hackers”
There also are security dangers. “Digital wallets’ containing consumers’ virtual currency stored on computers, laptops or smart phones, are not impervious to hackers. Cases have been reported of consumers losing significant amounts of virtual currency, with little prospect of having it returned.”
In addition, “holding virtual currencies may have tax implications”, according to the EBA alert.
The organisation said it was currently reviewing the use of virtual currencies in the EU, “in order to identify whether virtual currencies can and should be regulated and supervised”.
As of this writing, the Bitcoin Foundation had not returned Delano’s message seeking comment.
More on mobile payments can be found in the December-January print edition of Delano, online and on newsstands now.