ECB Releases Report on Virtual Currencies

By Tuesday, October 30, 2012 0 , Permalink 0

The motivation behind the report titled “Virtual Currency Scheme“, seems to be the rise of Bitcoin in recent years and the popularity it has managed to gain within a short period. The ECB has acknowledged in it’s report that virtual currencies “resemble money” and that these currencies have their dedicated “retail payment systems”.

The ECB however notes that due to absence of a physical counterpart with legal tender status and no entity backing the currencies, virtual currencies are different from real money and because of these reasons, redeeming of funds may turn out to be a costly affair.

The report draws quite a few conclusions which are more or less against virtual currencies. Some of these conclusions are: virtual currencies pose risk to users by bringing about instability for the lack of regulation; virtual currencies can be used by criminals to carry out illegal activities; and virtual currencies may negatively impact the reputation of central banks. There is this positive conclusion which states that at the current adoption rate virtual currencies do not pose a risk to real world financial system.