back to article Euro banks warned off Bitcoin as Canada regulates it

The European Banking Authority, which has previously warned consumers that they're unprotected if they get themselves into the crypto-currency game, has followed up with a don't-touch warning to banks. In this announcement, issued on Friday July 4, the EBA says it's identified “more than 70 risks” that apply to users, banks, …

  1. Anonymous Coward
    Anonymous Coward

    RIP Bitcoin during the Great Regulation 2014.

    1. Anonymous Coward
      Anonymous Coward

      You think.....

      Banks won't still get their hands dirty for the opportunity to make a few quid??

      1. Neal Palmquist

        Re: You think.....

        These banks are in socialist countries. Any lawyer that works for any bank is paid to make sure the organization does not step into activity that would give the socialist government a reason to send in the regulators and pick all the meat off the bones with fines. You can fight the fines in court and probably win the case. But after that fight against the socialist government is done, you will have no company left over.

        Socialist governments are giving no encouragement to the individual banks that they can make financial service products built on Bitcoin. The only way to read the statements would be to see them as thinly veiled threats. If a bank moves to offer products based on Bitcoin, that would be high risk and out of bounds. Good reason or not, socialist governments now have the reason they would need to come in and confiscate all the wealth.

        Everybody thinks Bitcoin is proof that the banks are threatened by it. Everybody thinks that banks are hypocritical because they complain about regulations on their industry at the same time they will not touch Bitcoin without regulation. But reality is that banks can't touch Bitcoin because of the regulations the banks have been complaining about.

  2. Ole Juul

    I'm not surprised

    Those businesses that Bitcoin is designed to circumvent don't see this as a good thing.

    1. PyLETS
      Mushroom

      Re: I'm not surprised

      Bitcoin doesn't circumvent any legitimate businesses. The idea that it reduces money transfer fees can only operate for those willing to enter into risks (which carry costs of their own) much greater than those undergone by those using conventional markets. An argument could be made comparing Bitcoins against gambling tokens issued and redeemed at casino cages, but I don't think any casinos consider their business models to be threatened by Bitcoin.

      It's a bubble speculation which has proved of some ongoing value to some cyber-criminals, drug dealers, botnet operators and digital blackmailers. The exchange value of a Bitcoin is predicated on a similar basis to the value of rare postage stamps, but is much less stable. These are man-made artefacts in deliberately limited editions of interest to collectors of such, and of no intrinsic interest to anyone else, unless your computer delivers you a notice telling you one is required as a fee to a blackmailer to recover the encryption key from a server operated by criminals or your data will be deleted.

      1. DanDanDan

        Re: I'm not surprised

        Please don't tell me you're one of the ones who paid for their own data due to crap security/backup practises?

        1. Richard Taylor 2 Silver badge
          Happy

          Re: I'm not surprised

          "Please don't tell me you're one of the ones who paid for their own data due to crap security/backup practises?"

          I generate most of my own

      2. Mark .

        Re: I'm not surprised

        What "much greater" risks are there for someone using it to transfer money, e.g., between countries, or in countries where banks don't offer easy transfer like in the UK? (The US's idea of 21st century banking is that you can use your phone to scan a cheque...)

        Essentially this is where Paypal got popular - the extra risk of an unregulated company was evidently outweighed by the reduced transfer fees or hassle. It's not clear to me why say a company that uses Bitpay to receive payments is a much greater risk?

        Maybe the European Banking Authority should warn people off Paypal...

        "It's a bubble speculation which has proved of some ongoing value to some cyber-criminals, drug dealers, botnet operators and digital blackmailers."

        We've been hearing "it's a bubble" since the value was $10 - still waiting for the crash. Any form of money has black market uses.

        1. Neal Palmquist

          Re: I'm not surprised

          When you are talking about banks that are regulated by socialist governments, the risk would be that the individual bank has stepped out of bounds after all these thinly veiled threats from regulators. Right or wrong, the salivating socialist government now would have the reason it needs to come in and pick all the meat off the bones with fines, effectively confiscating the wealth to become property of the state.

          Another risk is how would you carry a pint of water across a distance? Would you use a pail? Or would you use a sieve that needs a source constantly poured into it to prevent it from drying up? If you can move the sieve to it's destination faster than it runs out, you would never notice the difference. But a pail can preserve the contents for as slowly as you want to take your time. Bitcoin is a live grenade that can devastate your wealth at any time. And since vendors cannot afford to lose their merchandise, you will notice they only accept Bitcoin under condition that it can be immediately sold for the cash required to finance your purchase.

          The value of Bitcoin lies not in the USD price of Bitcoin, but in the vendors who want to keep and hold them instead of throwing them back onto the next fool who is waiting with cash at the exchange. Therefore, Bitcoin has no value.

        2. jonathanb Silver badge

          Re: I'm not surprised

          Paypal is registered with the Commission de Surveillance du Secteur Financier in Luxembourg as an electronic money issuer, it keeps customer funds in a segregated bank account and meets the capital adequacy requirements. A lot of people think those regulations don't go far enough in protecting consumers, but it is better than having no protection at all.

  3. Dan 55 Silver badge

    Seems like if there's a willingness to regulate bitcoin, it's just to be able to sieze it. Apart from the US of course which can sieze it or allow it as a political donation.

    1. Neal Palmquist

      When American Democrats and Republicans are singing in unison to convince voters that Bitcoin is an acceptable alternative to the United State Dollar, then what is there to stop those same voters from wanting an acceptable alternative to the political parties that screwed up the USD in the first place?

      America already tried the Bitcoin. Money printed by the South during the Civil War has all the properties that the Bitcoin community holds on a pedestal above the United States Dollar. Confederate Dollars are limited issuance, no central authority control that can print more, and diminish over time as they decay or become lost. We can already predict the future for Bitcoin and see what confederate currencies are ultimately worth.

      Don't be fooled by American politicians who support the Bitcoin. The true motivation is to hijack American taxpayers for the purpose of supporting Bitcoin prices. What you are seeing is movement to make taxpayers buy Bitcoins for the government to spend as it sees fit. As Bitcoin is nothing more than a container of the world reserve currency that it contains, the effect will be that United States Dollars will have flight out of the country in exchange for absolutely nothing. It will be free money for the rest of the world. It is a George Soros style attack on the dollar and America.

  4. DriveBy

    BitCoin is only the start of the private currency game...

    We cannot trust state currencies, they are less stable and more crooked than these "new" currencies, and what is more the increasing speed at which cash is being turned into a pariah, even more private people are going to enter the game.

    Just like everything that the state (mis)handles, once it is part of their "responsibility", which of course they stole, on the basis that the king was the government... A classic example of confusing your own money with that which belongs to the people. Money is only a trusted medium of exchange...

    ...So why should we trust the least trustworthy among us any more than the new kid on the block?

    1. Caesarius
      Devil

      @DriveBy

      Good point. But is it a case of "better the devil you know"? I can see two possibilities for new currencies:

      a) Someone is trying to make money out of you (also applies to banks dealing with conventional currency etc.)

      b) The virtual currency is along the lines of "free software"

      And, real or virtual currency, someone might hack your account.

    2. Jonathan 29

      Bitcoin is more stable and less crooked - are you kidding?

      Nitroglycerin is more stable than bitcoin and to be honest I would sooner do business in Mos Eisley.

      1. DriveBy

        Re: Bitcoin is more stable and less crooked - are you kidding?

        Good point...

        "As stable" then...!

    3. PyLETS

      State currencies not the only game in town

      I'm a member of a LETS group which has operated for 21 years. Money earned that long ago is still spendable at par with conventional UK sterling at our trading events. You don't have to waste electricity to do double entry accounting within a closed group. And if you dislike conventional currencies as value standards, do the same kind of accounting using hours or minimum wage hours as your value standard at the cost of making it marginally more difficult for account-holders doing tax returns.

    4. Pete 2

      Trust what?

      > So why should we trust the least trustworthy among us any more than the new kid on the block?

      But you seem to be forgetting the golden rule: whoever has the gold makes the rules.

      Governments only exist to raise revenue -- and then spend it¹. Therefore it's easy to see that they, above all others, have a vested (literally) interest in supporting the value of the currency they, and therefore by association: we, use for those transactions.

      You may be suspicious of them, but where money is concerned they are extremely motivated to retain the confidence of the international markets and thus the value of the currency. So if nothing else can, that at least will keep them on the financial straight and narrow.

      [1] There's also a small matter of creating laws. But that's largely irrelevant to this conversation - and anyway, we pretty much have all the laws we need. We just need to implement them better.

      1. Black Road Dude

        Re: Trust what?

        Gold ha we sold that years ago!

      2. Just Enough

        Re: Trust what?

        "Governments only exist to raise revenue -- and then spend it"

        Everything else just spontaneously organises itself, I suppose?

        "we pretty much have all the laws we need. "

        Cool. I've just invented anti-gravity boots. No new laws required to regulate their use. The skies are mine!

        "We just need to implement them better."

        And who is going to do that?

        1. Anonymous Coward
          Anonymous Coward

          Re: Trust what?

          Re: Trust what?

          "Governments only exist to raise revenue -- and then spend it"

          Everything else just spontaneously organises itself, I suppose?

          <no, it's paid for by spending the above>

          "we pretty much have all the laws we need. "

          Cool. I've just invented anti-gravity boots. No new laws required to regulate their use. The skies are mine!

          <No, the FAA and CAA regulate those already, read the bit in the post about implementing them better>

          "We just need to implement them better."

          And who is going to do that?

          <the authorities as they see fit and when a kneejerk is required>

      3. Brangdon

        Re: vested interest in supporting the value of the currency

        The expected lifetime of a fiat (ie, issued by government and not backed by anything) currency is about 30 years. You'd be surprised how many national currencies have failed within our lifetimes.

        See http://georgewashington2.blogspot.co.uk/2011/08/average-life-expectancy-for-fiat.html. "Twenty percent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes."

  5. Interested Party

    Cash... ?

    "The EBA also expresses concern about the lack of consumer protection. It notes that user can lose their cash holdings in a variety of ways - they have their wallets stolen, they lose their wallets, or the money is stolen from their safe - all without any consumer protection or refund right."

    1. Jonathan 29

      Re: Cash... ?

      The banks would dearly love to get rid of grubby cash from their nice banks and preferably grubby people too. It is also somewhat harder to steal cash from my wallet over the Internet, but I would think the same advice applies. It is not a good idea to store more than a few hundred pounds in cash or bitcoin.

      1. Caesarius
        Unhappy

        @ Jonathan 29 Re: Cash... ?

        Have my up-vote, but I can't help wondering if there is anything at all that is safe to put your money into. Oh, except a good supply of food and sufficient arms to protect it, but that precludes any benefit from civilization.

        1. Jonathan 29

          Re: @ Jonathan 29 Cash... ?

          Bank accounts are insured by the Government for up to £85,000. Boring, but about as safe as it gets. If you are worried about societal collapse, I guess gold and chickens.

          1. Zot

            Re: @ Jonathan 29 Cash... ?

            I'd like to know how they are going to insure everybody's accounts when there's not enough gold left to pay it.

          2. Anonymous Coward
            Anonymous Coward

            Re: @ Jonathan 29 Cash... ?

            Up until the point where the entire banking system collapses, when the guarantee will be suddenly revoked (like they tried in Cyprus). Organisations with a monopoly on violence can get away with stuff like that. One of lifes most important rules is never believe anything a government promises is actually guaranteed in the face of changing circumstances. They will alter the deal. Pray they don't alter it further.

            1. Zot

              Re: @ Jonathan 29 Cash... ?

              It's scary. The government knows the banks are insolvent, that's one reason why they bought those anti-riot water cannons.

              Any day now, hey.

            2. Yet Another Anonymous coward Silver badge

              Re: @ Jonathan 29 Cash... ?

              Or upto the point where the bank won't let you transfer money to your relatives in Syria, or Eritrea, or Cuba or any other country that is now terrorist, or you can't transfer money to a person with an arabic name that shares the first 5 letters with somebody on a no-fly list.

              Or VISA decides (for purely commercial reasons) that it won't accept donations to the EFF, or wikileaks, or CND, or Greenpeace, or the democrats.

  6. Anonymous Coward
    FAIL

    The Euro Banks will soon be

    irrelevant. Adios! We won't miss you!

  7. Caesarius
    Holmes

    Er, isn't this like...

    ...stocks and shares?

    - value can go up or down

    - at risk of someone manipulating the market

    - someone can hack my account (well, in principle, anything can be hacked, just as long as it is "sophisticated enough": see Gödel's theorem)

    - (add more items to list)

    1. Jonathan 29

      Re: Er, isn't this like...

      Shares can be manipulated, especially small caps, which is why there are usually a lot of regulations about what you can and can't do. Sensible regulation and rules that make it clear who the lead developers are should be welcomed.

      Banks, like people can get pulled in by hype and risk more than they ought on very risky investments. Since they have recently shown themselves incapable of self restraint, it seems like a very good idea to warn banks against bitcoin investments.

    2. Spleen

      Re: Er, isn't this like...

      Except that:

      - shares are more tangible than Bitcoin - if you own a share in Glaxosmithkline, you own a very small percentage of a load of offices, laboratories, drug stockpiles, patents... all things that exist and are of genuine value.

      - shares pay dividends.

      Shares may not work as a currency because they are too volatile, but they do work as an investment. Bitcoin doesn't work as either.

      1. Anonymous Coward
        Anonymous Coward

        Re: Er, isn't this like...

        Shares are just as intangiable as bitcoins. Just because you own a share, doesn't mean you get to walk into one of their labs and walk off with a beaker or volumetric flask. The only thing you can do with a share certificate from Glaxo is sell it again for whatever someone else is prepared to offer you for it, which is pretty much the only thing you can do with a bitcoin.

  8. Pete 2

    A matter of scale

    The basic problem that I have with BTC, and the reason I won't touch it (yet?) is its sheer volatility.

    While it *may* be possible (leaving aside the desirability of doing so) to buy a lot of life's basics with BTC it is a small currency: there are only about 13 million of the suckers in existence and there'll never be more than 20-odd million. Even at their current value, Bill Gates could buy all of them and barely notice, if he so chose.

    They are also subject to scare stories as one major government, or exchange, or hacking group -- or whoever makes statements for or against the security, status, value or validity of the stuff. You can't base your long-term wealth on an asset who's value can drop like a rock from one year to the next.

    So while it's a nice toy for people to demonstrate to the world (or their friends) how hip, trendy and down wiv' da kidz (although it's only mothers of teenagers who would say something like that) they are, it's not something I'd be willing to bet my house, my salary and my pension on. So until BTC acquires both the status and scale -- measured to the nearest TRILLION € or £, I'll stick with something that I hope will see me into my dotage.

    1. Anonymous Coward
      Anonymous Coward

      Re: A matter of scale

      I'd mostly agree - except that the value of ANY asset CAN drop like a rock from one year to the next.

      For bitcoin, the issue is that its value HAS dropped like a rock from one year to the next.

      Now, "past performance is no indicator of the future" - but the underlying issues with bitcoin that lead to its extreme volatility have yet to be resolved, so I'd say in this case it is.

      This is true of many asset classes in their early days until the issues are resolved. Will it happen with bitcoin ?? Will national currencies got the way of the Dodo ?? Who knows...

      1. Just Enough

        Re: A matter of scale

        "This is true of many asset classes in their early days until the issues are resolved."

        It's also true of investment bubbles that crash spectacularly and disappear forever. Will it happen with bitcoin ??

        1. PyLETS

          "disappear forever. Will it happen with bitcoin ??"

          Unless the cypto protocols are broken and the system branches wildly without consensus about which branch is "authentic", I expect Bitcoins might be traded in 100 years, just as Penny Blacks are after they ceased to be carried by anyone's need to have letters delivered, amongst a historically inclined and nerdy trainspotterish sect. They probably won't generate many press articles though once they stop carrying some other historical baggage with them such as payment for blackmail demands, other than in the cryptocurrency equivalents of stamp-collector's magazines.

          Of course this is all predicated on continuing interest in the "my CPU/GPU/Hashing farm is bigger than yours" electricity-wasting competition continuing.

          1. Cliff

            Re: "disappear forever. Will it happen with bitcoin ??"

            " I expect Bitcoins might be traded in 100 years, just as Penny Blacks are after they ceased to be carried by anyone's need to have letters delivered"

            You could be right, but the fact they're intangible makes them an awful lot less interesting in an album, makes them harder to show off, and being digital they're not going to need special love to stop them degrading in air/light so their perceived 'value' as a collectible may be limited. How many people show off Win 3.1 which could be a 'collectible' in some senses? Certainly a few, but enough to be a market?

    2. PyLETS

      Re: A matter of scale

      If you're interested in non-state currencies which have been proven to have operated at scale with a stable value standard for decades (since the 1930ies) have a look at Wirbank in Switzerland. If you are a Swiss SME with a good trading reputation, then you'll be able to get the cheapest mortgage finance in the world using this community currency, which is very widely used and accepted by and between Swiss SMEs. It's just like a LETS, in relation to how the accounting is done, except it's done as a professional and not as a voluntary operation, and credit control is done managerially rather than by providers of goods and services within the currency.

    3. d3rrial

      Re: A matter of scale

      Volatility disappears the more the supply is diluted / used. As it stands Bitcoin is fairly unevenly distributed allowing those who hold much to make big impacts on the market. Then of course the view of it as a volatile asset causes some investors / users shaky hands and when they see even slight downward trends, they immediatly hammer the sell button, which is of course a feedback loop. If Bitcoin is distributed more evenly, big holders have less of an impact on market value and volatility decreases.

      Also Bill Gates couldn't buy all of them and barely even notice. There are of course several problems with this statement, let me list them:

      Not all bitcoins are currently listed on exchanges, the exchange market isn't very liquid.

      Not everyone would sell their bitcoins.

      Assuming both of the above wouldn't exist, as soon as Bill Gates started putting up huge buy orders, the demand would go up, causing the suppliers to increase the price until supply and demand are in equilibrium. As Bill Gates wants to buy every single Bitcoin, we can assume that demand is infinite. Which would mean that no matter how much the price is increased, demand still exists and thus the market price of bitcoin would tend towards infinity.

      Also Bitcoin has a market cap of $8,149,533,010. Bill Gates has approximately $76 Billion. Which means, if the price of the bitcoin wouldn't increase as I said above, he could buy every bitcoin only less than 10 times. Which he would definitely notice.

    4. Black Road Dude

      Re: A matter of scale

      21 million bitcoins 21,000,000.00000000

      or 2.1 Quadrillion satoshis 2,100,000,000,000,000

      it depends how you look at it. its the same number similar to the difference between pounds and pence.

    5. Mark .

      Re: A matter of scale

      And this is why price increases for Bitcoin are a good thing. Note the number of Bitcoin is not what measures the size of the currency, rather it's market cap (number times value of 1 Bitcoin). Though for Bill Gates to buy all of them, that would itself cause the price to rocket (especially if people knew that Bill Gates was on a mission to buy all of them). But yes, a bigger market cap means it's harder for anyone to influence the price.

      "You can't base your long-term wealth on an asset who's value can drop like a rock from one year to the next."

      Oh, good thing that no one's suggesting that today.

      Your last paragraph is a straw man, who says you should bet your house, salary and pension on it? I wouldn't trust those things with Paypal, or bet them all on high risk investments. That doesn't mean that those things are of no use at all.

  9. Crypto Carl

    Ha!

    One resists the invasion of armies; one does not resist the invasion of ideas.

  10. Neoc

    Easy out.

    You buy bitcoins. You sell bitcoins. Their actual values are based on supply and demand. Does that sound like something that already exists?

    Yep: Bitcoins are just easily-tradable stocks (but without the whole bullshit that goes with short-selling, futures market, etc...). So treat them like stocks and you'll have already-existing regulations.

    1. cyclical

      Re: Easy out.

      Except stocks are tied to something tangible, with physical presence that means even penny stocks usually have some kind of actual 'worth'. Bitcoin value is based on nothing - even the cryptographic proofs are utterly pointless and a massive waste of electricity. They should be treated like what they are, an academic white paper that was somehow picked up by scam artists, junkies, money launderers and libertarians and turned into the worlds most annoying currency.

  11. JustNiz

    >> The EBA says it's identified “more than 70 risks” that apply to ... fiat currencies.

    ...so that includes the Pound, the Dollar, the Euro and just about every other current national currency then.

    Interestingly, Bitcoin is the only one of which actually isn't a fiat currency. Unlike dollars/pounds etc, the maximum number of Bitcoins is finite, governments cant just print more at whim, and they are actually based on something tangible (computational work).

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