The EU banking regulator has warned of a “possible risk” using virtual currency such as bitcoin, which is program code and isn’t regulated by any country, as the virtual currency doesn’t offer any protection to consumers or mechanism for compensation.
The European Banking Authority (EBA) is studying the opportunities and needs of the new economic sector. In case of any problems with their investment, users of virtual currencies such as bitcoin will have to solve any problems themselves.
“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 EBA said in a statement.
The regulator emphasized that digital currencies are facing sharp fluctuations in exchange rates. In the last month the bitcoin market price has varied between less than $300 to over $1000 per unit.
“Cases have been reported of consumers losing significant amounts of the virtual currency, with little prospect of having it returned. Also, when using virtual currency for commercial transactions, consumers are not protected by any refund rights under EU law,” said the EBA.