European Central Bank releases report on virtual currencies

The European Central Bank (ECB) has published a report on virtual currencies titled “Virtual currency schemes – a further analysis”.

“Virtual currency schemes, such as Bitcoin, are not full forms of money as usually defined in economic literature, nor are virtual currencies money or currency from a legal perspective,” the ECB’s report stated.

The ECB pointed out that virtual currencies have a variety of risks, such as scams and over-reliance on IT. However, it noted that currently Bitcoin is used for around 69,000 transactions per day worldwide, compared with a total of 274 million non-cash retail payment transactions per day for the European Union alone.

The report says that virtual currencies “could pose a challenge to retail payment instruments and innovative payment solutions as regards costs, global reach, anonymity of the payer and speed of settlement. A new or improved virtual currency system, if it overcame the current barriers to widespread use, might be more successful than the existing ones, specifically for payments within ‘virtual communities’/closed-loop environments (e.g. internet platforms) and for cross-border payments.”

The ECB pledged to continue closely monitoring developments in virtual currency-related payment schemes, due to the adverse effect that “a major incident involving virtual currencies and subsequent loss of trust could have on consumer confidence in electronic payment instruments, in e-money and/or in specific payment solutions, such as those in place for e-commerce.”

The ECB report can be downloaded at the following link: https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf?fe92070cdf17668c02846440e457dfd0

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