The European Union’s financial authorities have warned investors about the major risks of virtual currencies on Monday.
According to the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), currently available virtual currencies are digital value traders issued by non-central banks and are therefore not behind central bank or other public guarantee, and they do not count as currency or money on the basis of their legal status.
These digital assets are very risky, usually behind no tangible asset coverage and are not covered by EU law, and therefore do not offer legal protection to investors.
According to the three supervisors, it is particularly worrying that more and more people are buying Bitcoin and many virtual currencies with the expectation that their value will increase steadily, but they are not aware of the high risk of losing their money.
According to the warning, the volatility is typical for example that the value of Bitcoin’s unit fell from EUR 1,000 in January last year to EUR 16,000 in December, followed by nearly 70 percent to EUR 5,000 by mid-February, and strengthened by 40 percent to EUR 7,000 in the last period.
According to the findings of the three financial authorities, the global capital market capitalization of the top 100 virtual currencies currently exceeds 330 billion euros.
In the warning, the authorities emphasize that if someone buys a virtual currency, there is a high risk of losing a substantial part or even a full amount of their invested money.
The same is true for financial products that buy direct investors from virtually virtual currencies.
It risks bearing in mind that if a virtual currency trading platform goes bankrupt, ceases its activity, attacks a cyber attack or law enforcement authorities for some reason seize its assets, European Union law does not provide any special protection that would cover the loss of investors and there is no guarantee nor to investors again having access to their virtual currency assets.
According to the call, these risks have come true many times around the world.
The strong currency fluctuations of virtual currencies, the uncertainty surrounding their future and the unreliability of platforms selling these currencies make these financial instruments inadequate investment for most consumers, but especially for those looking for investment in long-term savings, such as retirement age opportunities – a joint call from the financial authorities on Monday.
Source: MTI / Image: suksado.hu /