Talking at a Bundesbank conference Yves Mersch, an executive board member with the ECB, said that the absence of a clear legal framework is a major reason that has led to considerable legal uncertainty among Bitcoin users. In consequence, according to him Bitcoin users face considerable legal uncertainty.
Yves Mersch also believes that many Bitcoin users are unaware of the risks surrounding the virtual currency. Coming from the leading economist and jurist who won a position on the European Central Bank’s executive board a couple of years ago, it sounds quite accurate as such accusations have long been made on Bitcoin and he is not alone in it.
Several Central Banks have Warned Bitcoin Users
Bitcoin which was launched privately in 2009 as an alternative payment method is independent of central banks and commercial banks, has its supporters and detractors as well. Supporters believe that the revolutionary concept of digital currencies may transform the way money is being conceived by people.
On the other hand sharing the opinion that Bitcoin is an apt solution for easy payment Yves Mersch said that as payments are made directly between the participants, bank charges are eliminated, it is definitely the rightful solution that people want. However, he admits that exchange rate losses can quickly cancel out this advantage.
Yves Mersch believes that the Bitcoin exchange rate slumped to EUR70 from EUR170 in April 2013 after the Bitcoin exchange temporarily suspended trading and triggered panic selling. He says that as further price falls occurred after hacker attacks, when Bitcoins were stolen on several occasions, it generated trust deficit among investors.
Collapse of Bitcoin Exchange Mt. Gox
Bitcoin has seen several debacles recently; however, the one that hit the most was the collapse of the leading Bitcoin exchange Mt. Gox in February this year. The Bitcoin exchange not just stopped all transactions, and its website disappeared but also accused Bitcoin for the losses incurred to it and investors.
Thousands of investors lost their investment with the collapse of Mt. Gox which according to many insiders in the company fell due to misappropriation of funds by the CEO of the Bitcoin exchange. Now Yves Mersch believes that since the Bitcoin trading platforms are unregulated, losses up to 100% are possible.
Mersch also added that interested parties can very easily download the application for Bitcoin, they neither understand how this payment system works exactly, nor the risks they run when using it.
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