The Dangers of Unregulated Peer-to-Peer Platforms, Warns EBA

One of the EU’s most reputable banking and Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term regulatory agency, the European Banking Authority (EBA), has issued a notification that warns consumers against the buying, holding and trading of virtual currencies. The announcement comes on the back of increased interest and use by private consumers; the EBA is concerned about the infrastructure issues relating to hardware and software, as well as potential regulatory problems.

The official press release is accompanied with a three-page user guide issued by the regulator. It outlines the history, background and use of virtual currencies, as well as the possible issues. The document concludes with a risk warning that is all so familiar to margin FX brokers, stating: "You should not use ‘real’ money that you cannot afford to lose.”

Virtual currencies or peer-to-peer currency networks have grown extensively over the last year as the virtual product becomes popular among an international client base. According to Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term, a database site for virtual currencies, there are over 12 million Bitcoins in circulation under BTC. Bobby Lee, CEO of BTC China, spoke to Forex Magnates about trading volumes experienced on their exchange, saying: “Over the past week, we have seen daily transaction volume of over 元300 million (CNY).”

The EBA joins a growing list of regulators and central banks that are raising concerns against the virtual currency boom, alongside China, Korea and New Zealand.

Today, Norway’s main tax authority cautioned users about potential tax implications on the purchase and sale of virtual currencies.

The EBA notification is somewhat speculative insofar of its assessment of virtual currency exchanges; due to the recent surge in activity the regulators have limited evidence on the possible issues with Bitcoins and other virtual currency.

CEO and co-founder of Safello, a Swedish currency exchange, Frank Schuil commented to Forex Magnates: “The main concerns that I see ventilated are those of AML risk and speculation. This is fair and like other disruptive technologies Bitcoin and crypto currencies in a whole should be regulated to protect consumers and prevent money laundering. Most countries are cautiously optimistic.”

Midpoint, launched earlier this year as a UK-based currency exchange, is regulated by the HM Revenue & Customs, a government organization that administers payment service providers.

The EBA warning comes as virtual currency networks such as Bitcoins takes center stage on the main news portals. Nonetheless, the OTC or decentralized nature of the instrument means warnings are only as far as regulators can go.

Jeremy Bonney, Product Manager at Coindesk, stated in an emailed response: “Bitcoin is decentralized – which means it’s difficult for a government to kill, even if it wanted to.”