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Virtual currencies
101. A virtual currency is a form of unregulated digital money that is not issued or guaranteed by a central bank and that can act as a means of payment. Virtual currencies have come in many forms, beginning as currencies within online computer gaming environments and social networks, and developing into means of payment accepted offline or in ‘real life’. It is now increasingly possible to use virtual currencies as a means to pay for goods and services with retailers, restaurants and entertainment venues. These transactions often do not incur any fees or charges, and do not involve a bank.
102. In recent times, Bitcoin has changed the character of virtual currencies by setting the scene for a new generation of decentralised virtual currencies. Bitcoin started off amongst consumers in the online world who were looking, amongst other things, for a means of payment for the internet age that did not rely on any central Government or central banks.
103. Supported by heavy media coverage, the use of Bitcoins has spread rapidly: in 2013 alone, the number of users is said to have grown from 45 000 to more than 400 000. An increasing number of retailers, both online and in the real economy, have started to accept Bitcoins as a means of payment that does not incur any exchange rate fees and which does not usually involve a bank or any charges that may be placed on a transaction.
104. The EBA decided to issue, in December 2013, a warning to consumers regarding the risks related to virtual currencies, i.e. the risk of losing money on the exchange platform, the risk that money could be stolen from the digital wallet, the lack of protection when using virtual currencies as a means of payment, the fact that the value of virtual currency owned can change quickly and even drop to zero, the fact that transactions in a virtual currency may be misused for criminal activities, including money laundering, and the fact that individuals holding virtual currency may be subject to tax liabilities in their countries. Several national supervisors followed suit and published statements on their own websites and/or crossreferenced
the EBA warning or one of its 22 translations.
105. However, the question yet to be addressed is whether virtual currencies can and ought to be regulated. To that end, the EBA will establish a cross-sectoral taskforce in H1 2014, with the aim of finding an answer to this question. The analysis would see the taskforce identifying not only the risks for consumers of using virtual currencies as a means of payment, but also risks that may arise
- for regulators in achieving their anti-money laundering objectives, given that the anonymous nature of virtual currencies is conducive to this type of activity;
- for investors from using virtual currencies for speculative purposes or from buying investment products that are based on virtual currencies (e.g. ETFs using Bitcoins as an underlying asset); and
- for societies more widely, as a result of virtual currencies being used for criminal activities, such as the anonymous purchase of illegal goods, including drugs and weapons.
101. A virtual currency is a form of unregulated digital money that is not issued or guaranteed by a central bank and that can act as a means of payment. Virtual currencies have come in many forms, beginning as currencies within online computer gaming environments and social networks, and developing into means of payment accepted offline or in ‘real life’. It is now increasingly possible to use virtual currencies as a means to pay for goods and services with retailers, restaurants and entertainment venues. These transactions often do not incur any fees or charges, and do not involve a bank.
102. In recent times, Bitcoin has changed the character of virtual currencies by setting the scene for a new generation of decentralised virtual currencies. Bitcoin started off amongst consumers in the online world who were looking, amongst other things, for a means of payment for the internet age that did not rely on any central Government or central banks.
103. Supported by heavy media coverage, the use of Bitcoins has spread rapidly: in 2013 alone, the number of users is said to have grown from 45 000 to more than 400 000. An increasing number of retailers, both online and in the real economy, have started to accept Bitcoins as a means of payment that does not incur any exchange rate fees and which does not usually involve a bank or any charges that may be placed on a transaction.
104. The EBA decided to issue, in December 2013, a warning to consumers regarding the risks related to virtual currencies, i.e. the risk of losing money on the exchange platform, the risk that money could be stolen from the digital wallet, the lack of protection when using virtual currencies as a means of payment, the fact that the value of virtual currency owned can change quickly and even drop to zero, the fact that transactions in a virtual currency may be misused for criminal activities, including money laundering, and the fact that individuals holding virtual currency may be subject to tax liabilities in their countries. Several national supervisors followed suit and published statements on their own websites and/or crossreferenced
the EBA warning or one of its 22 translations.
105. However, the question yet to be addressed is whether virtual currencies can and ought to be regulated. To that end, the EBA will establish a cross-sectoral taskforce in H1 2014, with the aim of finding an answer to this question. The analysis would see the taskforce identifying not only the risks for consumers of using virtual currencies as a means of payment, but also risks that may arise
- for regulators in achieving their anti-money laundering objectives, given that the anonymous nature of virtual currencies is conducive to this type of activity;
- for investors from using virtual currencies for speculative purposes or from buying investment products that are based on virtual currencies (e.g. ETFs using Bitcoins as an underlying asset); and
- for societies more widely, as a result of virtual currencies being used for criminal activities, such as the anonymous purchase of illegal goods, including drugs and weapons.