Business Irish

Thursday 22 February 2018

Watchdog warns over bitcoin dangers

Louise McBride

Louise McBride

The Central Bank has warned consumers who invest in Bitcoin that they are not entitled to get their money back, should any company holding their controversial currency go bust.

Bitcoins are a virtual currency that were initially used online but which are now being used to pay for 'real life' goods such as meals in restaurants, concert tickets and college courses.

The growing popularity of bitcoins has also pushed up the price of the currency, prompting many to invest.

"Bitcoin is not a service regulated by the Central Bank and does not have the status of a legal currency," said a Central Bank spokeswoman.

She added: "It is not covered by any Irish regulatory protections and does not fall under the Deposit Guarantee Scheme."

The Deposit Guarantee Scheme ensures that anyone with savings of up to €100,000 will be reimbursed, should the financial institution holding the savings go bust.

Last week, the German central bank, the Bundesbank, warned about the dangers of the virtual currency.

Bundesbank board member Carl-Ludwig Thiele, warned that bitcoins were "highly speculative" due to their 'volatile' state, and the way they were constructed.

Due to this volatility, investors stand to lose a lot of money should the value of bitcoins go down.

Thiele's warning comes only a few weeks after the European banking regulator, the European Banking Authority (EBA), warned about the risks of bitcoins.

"No specific regulatory protections exist that would cover you for losses if a platform that exchanges or holds your virtual currencies fails or goes out of business," said the EBA.

Consumers have no rights to a refund when they use bitcoins to pay for goods.

Most bitcoins are bought at online exchanges using a conventional currency -- and then moved to a personal bitcoin account or 'digital wallet'.

Consumers then use that wallet to sell bitcoins to anyone else who will accept them -- or convert them back into a conventional currency.

"Digital wallets are not impervious to hackers," said the EBA. "Cases have been reported of consumers losing virtual currency in excess of €736,000, with little prospect of having it returned."

Irish Independent

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