In a warning issued by the National Bank of the Kyrgyz Republic the users in the country have been warned against Bitcoin and other similar virtual currencies. According to government bank recently the world has seen the emergence and spread of such new phenomenon of virtual currencies like Bitcoin; however, there are some inherent risks associated with them.
The government agency is of opinion that in Kyrgyzstan as well there are some organizations that are trying to promote the digital currencies. However, under the legislation of the Kyrgyz Republic the sole legal tender on the territory of the country is the national currency of Kyrgyzstan “som.”
Thus, according to it the use of “virtual currency” Bitcoins, in particular, as a means of payment in the Kyrgyz Republic will be a violation of the law of our state. The decision is in consonance with various governments like the ones from China, India and others that have issues similar warnings for Bitcoin users.
The Kyrgyz Republic’s national bank says that there are some fundamental problems with Bitcoin; for instance, there are risks associated with the lack of security as nobody has obligations on this “virtual currency” and they do not have the material (financial) support as well that can back them up.
Most of the Reasons Cited by the Kyrgyz Republic’s National Bank is Obvious
The government bank says that as opposed to the traditional paper-based or non-cash money held in banks, the digital currencies do not have a tangible material expression and operates on the basis of distributed electronic networks. Also, their circulation limited as it is carried out only within that network.
The Kyrgyz Republic’s national banks also observes that there is no real value of virtual currencies as the cost of virtual currency is not tied to any currency or other asset. Also, as the formation of its cost is influenced by demand and supply for it, according to the bank there is huge risk of exchange rate volatility and loss of value for customers.
The press release from the organization says that as the virtual currency is regulated by no central government agency in the world, it becomes difficult to have a tab on it when something heavily goes wrong. Also, as virtual currencies in the country are not under the jurisdiction of the National Bank, there are several risks for the users.
To contact the reporter of this story: Deepak Tiwari at firstname.lastname@example.org