According to the Superintendencia Financiera de Colombia (SFC), the government body responsible for overseeing financial systems in the country, Bitcoin is an asset that has no equivalent to the legal currency of Colombia in not having been recognized as currency in the country. The regulatory body issued new guidance on its treatment of Bitcoin and other digital currencies on Wednesday, 26th March.
In its warning, the SFC listed a range of concerns about Bitcoin which are though not new, have become quite relevant after the collapse of the once a leading Bitcoin exchange Mt. Gox. In fact, the agency named the now-bankrupt Japan-based Bitcoin exchange which incurred significant losses to users when it suddenly became insolvent.
Various other governments have issued similar warnings as their citizens are often at the receiving end if such fraudulent activities happen. India and China are the two major economies which issued similar warnings and now Colombia joining the club; it looks Bitcoin exchanges need to work hard to rule out failures like what Mt. Gox saw.
In fact, the SFC reiterated that digital currencies can be used for illicit means like money laundering and terrorist financing. Similarly, if some Bitcoin user falls victim to theft, he cannot get justice through traditional means and for that reason SFC seems worried. After the collapse of Mt. Gox, hundreds of customers lost their investments.
Mt. Gox Collapse Traumatized Many Investors
In the warning issued, the SFC said that this Office notes that supervised entities are not authorized to guard, invest or mediate these instruments. Additionally it is for people to know and accept the risks inherent in their operations with ‘virtual currency’ risks. The measure on the part of the SFC is to inform its people.
The regulatory body made it clear that virtual currency ‘ not backed by physical assets, a central bank, or the assets or reserves that authority, so that the exchange value of the same could be drastically reduced and even reach zero. The SFC believes that as Bitcoin is extremely volatile in exchange market, customers have higher probability of losing their investments to schemers.
Schemers and speculators are the ones who are going to profit from the volatile exchange value of Bitcoin and as it’s not regulated by law of the land; customers won’t be able to get their money back.
The SFC said that the alarm was launched as trading on the currency can be provided for illegal or fraudulent, unauthorized resources, money laundering and terrorist financing deposits.
To contact the reporter of this story: Deepak Tiwari at email@example.com