articles | 11 February 2014

Cyprus Central Bank warns over Bitcoin risks

The Central Bank of Cyprus has issued its second warning in two months over risks related to virtual currencies, saying that the Bitcoin is not a legal tender.

“The CBC does not authorise any activity falling within its mandate unless legal compliance is ensured. Any activity without the required license is liable for breach of law,” said the recent CBC announcement. To date, efforts by Bitcoin marketers Neo & Bee to open a channel of communication with the central bank seem to have failed, while the institution’s hesitation to deal with the mater has forced the Cyprus Stock Exchange and the regulator Cyprus Securities and Exchange Commission to put plans for the introduction or use of Bitcoin on the backburner.

Neo & Bee plans to open a series of information stores in Cyprus to raise awareness about the virtual currency, while admitting there are risks involved, just as is the case of trading in any currency, equity or commodity. The CBC warned that there are no specific regulatory protection measures to cover losses from the use of virtual currencies if a platform that exchanges or holds them collapses and, thus, there is the risk of losing their money. Noting some of the risks associated with virtual currencies, the CBC pointed out that there is no guarantee or legal obligation to reimburse at face value virtual currency owners, nor to reimburse them at any time. It also said that the price of virtual currencies is subject to high volatility and it may rise sharply or even fall to zero value.

The CBC said that acceptance of virtual currencies by merchants is based on their discretion and may cease to exist at any point and with no prior notice, in other words, any merchant may refuse to accept it for payments. The University of Nicosia has already started accepting fee payments in Bitcoin, primarily from students whose home countries have rigid and slow-paced banking systems, such as strict exchange controls. But a UNic official had told the Financial Mirror earlier that the university did not intend to trade in the virtual currency, but only accept it as a method of payment, subsequently cashed into the local currency, the Euro. But seeing the opportunity that lies in studying the new domain of virtual currencies, the University of Nicosia has introduced a comprehensive framework to help develop Cyprus into a hub for Bitcoin trading, processing and banking. It has also taken the bold step of launching a Master’s Degree in Digital Currency, the first of its kind in the world.

Source: Financial Mirror

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