The cryptocurrencies balloon could burst at any time and the people who invest in them risk losing all their money.
This is the position of three of the European Union’s financial regulators which have issued a formal warning to consumers because of cryptocurrencies hype. It comes against the backdrop of sharp changes in the prices of Bitcoin and other virtual currencies.
At the bottom of the concern of regulators is the increasing number of consumers purchasing cryptocurrencies without being aware of the risks. Currently, virtual currencies and digital markets for their trade and exchange are not regulated in the EU. This means that there are no protections for consumers as they are in regulated financial services.
There is also no law to help them in the event of theft and such incidents are happening periodically. Thus, any loss of funds or their theft due to cyber-attacks will not be covered by national protection schemes.
At the end of last year, Brussels announced that it introduced stricter rules for cryptocurrencies trade, including Bitcoin.
According to the EU, virtual currencies have become an excellent tool for money laundering or financing of terrorist organizations and other illegal activities. The new rules oblige those dealing with cryptocurrencies to declare their identity and location.
The decision was reached after almost a year of discussion, as some countries in the European Union, including Ireland, Cyprus and Malta, were against, because the financial services have greater importance for their economies.
Among the record high levels of Bitcoin in December, the main representatives of these digital currencies have collapsed at a two-digit pace at the beginning of this year.
The cause of the sharp decline has not yet been fully explained, but it is mainly linked to the emerging signals of potential bans of cryptocurrencies in different markets. Large economies such as the US, China, Russia and Germany are also considering different measures to establish a legal framework which will introduce some rules on trade and use of the new currencies.
A warning followed in mid-month by Warren Buffet himself, who also does not believe in cryptocurrencies and warns that Bitcoin hype will not end well.
