Attention to the risks associated with virtual currencies

Friday, 7 February 2014

The Central Bank of Cyprus (CBC) wishes to draw the attention of the public to the risks associated with the purchase, holding or trading of virtual currencies (such as Bitcoin), which is not a legal tender.

The CBC does not authorise any activity falling within its mandate unless legal compliance is ensured. Any activity without the required license is liable for breach of law.

More specifically, the public needs to be aware of the fact that there are no specific regulatory protection measures to cover losses from the use of virtual currencies if a platform that exchanges or holds them collapses and, thus, there is the risk of losing their money.

The CBC makes note of some of the risks associated with virtual currencies, as follows:

-      There is no guarantee or legal obligation to reimburse at face value virtual currency owners, nor to reimburse them at any time.

-      The price of virtual currencies is subject to high volatility. It may rise sharply or even fall to zero value.

-      Acceptance of virtual currencies by merchants is based on their discretion and may cease to exist at any point and with no prior notice, in other words, any merchant may refuse to accept it for payments.

-      Transactions in virtual currencies are more liable to be misused for illegal activities.

The public is urged to look into all risks associated with the use of virtual currencies.

Relevant information can be found at the following web pages: