The National Bank of Belgium (NBB) and the Belgian Financial Services and Markets Authority (FSMA) have issued a joint statement, warning investors about the pitfalls of investing in digital currencies such as bitcoin and litecoin.
The statement points out that digital currencies are becoming relatively popular and attracting media attention, but they are also drawing in speculators looking to make a quick buck on bitcoin volatility.
Risks compounded by lack of regulation
The NBB and the FSMA stress that digital currencies are not issued by a central bank or a licensed issuer of electronic money. Therefore there is no regulation, supervision or oversight on virtual money, the regulators warn. The same, of course, applies to the issuers of virtual money, digital wallets and exchanges.
The statement outlines some examples of “serious risks attached to virtual money” such as:
- The internet environment is open to various risks, including security breaches and attacks that could allow hackers to gain control of digital wallets.
- The reliability of Internet-based systems has not been assessed by the regulators and there is a risk of fraud.
- Fluctuations in the exchange rate can lead to substantial financial losses. There is no authority or government supervision over the exchange rate. There is no guarantee that virtual money can be exchanged at any time for the original value.
- Furthermore, since digital currencies are not legal tender, no-one can be obliged to accept them. Unlike money held in savings accounts, digital currency deposits are not covered by government guarantees.
Belgian Bitcoin Association responds
In response, the Belgian Bitcoin Association issued a statement, saying that the latest warning issued by the NBB and FSMA is very similar to warnings issued by government agencies in other European countries.
“The Belgian Bitcoin Association believes that the current stance of the Belgian National Bank and the Financial Services and Markets Authority means that the bitcoin ecosystem is allowed to develop further in Belgium, which is very encouraging news for individuals and businesses,” the association told CoinDesk, adding:
“Belgium appears to be leading the way in Europe, demonstrating that larger businesses can integrate bitcoin into their payment methods with ease, as recently demonstrated by mobile telephone operator Mobile Vikings.”
The association also points out that smaller businesses and individuals now finally have some regulatory clarity, allowing them to experience bitcoin for themselves.
Prior to the regulatory warning, the Belgian Bitcoin Association held an informal meeting with the Belgian National Bank, attended by Belgian Bitcoin Association legal counsel Thomas Spaas and the association’s founding director and Secretary Chris D’Costa.
D’Costa said the meeting took place last week and the issues raised by the regulators in their latest statement are in line with what the Belgian Bitcoin Association was told to expect at the meeting.