The European bitcoin debate heats up

The European bitcoin debate heats up

Christophe Bourbier, Chairman of Limonetik

In 2009, the bitcoin was born. Invented by a community of IT professionals with the pseudonym Satoshi Nakamoto, this virtual currency does not answer to any supervisory authority. Here, no coins and no notes. It exists simply in the form of encrypted codes, exchanged between computers. Loved by some people and loathed by other, the bitcoin has aroused passionate discussion.

Today, one bitcoin is worth 400 euros. So no, it is not accessible to everyone and is of little use for every day grocery shopping. However, more and more sectors of activity enable consumers to pay for their products with bitcoin: computer equipment, printers, precious metals, wine & spirits, cosmetic products, over the counter medicines, bars & restaurants, electronic cigarettes… Infrastructures have been created to facilitate the development of the bitcoin.

Budapest (Hungary), August 2013: the world’s first bitcoin machine is installed. With this machine one may exchange national currency, in this case the Hungarian Forint, for credit on one’s bitcoin account. In a world first, a Spanish company has invested its entire share capital in bitcoins! This seemingly strange choice fits perfectly with the activity of this new Madrid based start-up, named Coinffeine, which aims to impose itself as a platform for exchanges… of bitcoins. In France, the Senate’s finance commission is optimistic and judges that this virtual currency is secure, that its applications are numerous and that the cost of transactions is low. However, such a positive evaluation is far from being shared unanimously across Europe.

The European Banking Authority (EBA) discourages the bitcoin’s use

The EBA has identified no fewer than 70 risks that bitcoin users are exposed to, in particular money laundering and other financial crimes. In a report published in July, the EBA advises European banks against offering bitcoin accounts to their customers. It also recommends national supervisory authorities to discourage financial institutions to buy, to keep, or to sell virtual currency as long as a system of regulation is not established.

For the European banking authority, governing structures charged with overseeing and ensuring the bitcoin’s integrity should be created. Several central banks are also concerned. According to them, the bitcoin bypasses the traditional banking system and allows anonymous payments to be made.

The risks are real, as demonstrated by the first breakup of an illegal bitcoin trafficking ring. In July, gendarmes in the South of France took down an illegal exchange platform on Internet. The website, which was used for the exchanges was not approved by the prudential supervision authority.

Savers are warned: opacity, volatility and legal security risk make for risky money.