Europe\u2019s top banking regulator called on the region\u2019s banks not to deal in virtual currencies such as Bitcoin until rules are developed to stop them being abused.<\/p>\n
The European Banking Authority (EBA) said it had identified more than 70 risks related to trading in virtual currencies, including their vulnerability to crime and money laundering.<\/p>\n
The London-based body in a statement advised European financial institutions against \u201cbuying, holding or selling virtual currencies while no regulatory regime is in place\u201d.<\/p>\n
\u201cA regulatory approach to address these risks would require a substantial body of regulation, some components of which would need to be developed in more detail,\u201d it added.<\/p>\n
Virtual currencies, most famously Bitcoin, have come under increasing scrutiny by financial regulators as their popularity has grown.<\/p>\n
Launched in 2009 by a mysterious computer guru, Bitcoin is a form of cryptography-based e-money that offers a largely anonymous payment system and can can be stored either virtually or on a user\u2019s hard drive.<\/p>\n
Backers say virtual currencies allow for an efficient and anonymous way to store and transfer funds online.<\/p>\n
But regulators argue the lack of legal framework governing the currency, the opaque way it is traded, and its volatility make it dangerous.<\/p>\n
Mt. Gox, once the world\u2019s biggest Bitcoin exchange, filed for bankruptcy in Japan this year and at least 11 banks in its key market of China have stopped handling the currency.<\/p>\n
Bitcoin\u2019s reputation was also damaged when US authorities seized tens of thousands as part of an investigation into dark Web bazaar Silk Road.<\/p>\n
\u201cWe want investors to understand fully the magnitude of the risks attached to this currency,\u201d said Olivier Vigna, chief economist of France\u2019s market watchdog AMF.<\/p>\n
Bitcoin prices surged to $1,240 in November last year before they crashed following moves by exchanges, financial institutions, and the government to rein in the virtual currency.<\/p>\n
They currently trade at more than $600 a Bitcoin.<\/p>\n
The EBA said that the risks of virtual currencies \u201coutweigh the benefits,\u201d such as faster and cheaper transactions, \u201cwhich in the European Union remain less pronounced\u201d.<\/p>\n
The authority said it was also concerned that \u201canyone with a sufficient share of computational power\u201d could exploit flaws in a virtual currency.<\/p>\n
Surge in Bitcoin cybercrime<\/strong><\/a><\/p>\n