Wednesday

1st Feb 2023

EU watchdogs warn of cryptocurrency price bubble

  • EU regulators say people risk losing their money with cryptocurrencies (Photo: BTC Keychain)

European regulators say people investing in cryptocurrencies, such as Bitcoin, risk losing all their money.

On Monday (12 February), the European Supervisory Authorities (ESAs) watchdog issued a joint statement that the currencies "have shown clear signs of a pricing bubble."

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It said people are not protected if their virtual currency were to be stolen or subject to a cyber-attack, given the unregulated nature of the digital money. The ESAs include the securities (ESMA), banking (EBA), and insurance and pensions regulators (EIOPA).

EU commission vice-president Valdis Dombrovskis in a tweet said he welcomed the statement, following his December warnings of "clear risks" the currencies posed.

The London-based EBA had also issued a similar warning four years ago, when it said people could lose their money when investing in virtual currencies.

The latest warning comes amid a spike in Bitcoin trading over the past week after having plummeted by some 60 percent from around $20,000 (€16,237) in December to below $8,000 (€6,495) in February.

Pressure to regulate the currency in Europe has also emerged following demands by members of the governing council at the European Central Bank.

The regulators' warning also comes ahead of plans by the European Securities and Markets Authority (ESMA) to scrutinise the virtual currency and its associated blockchain technology.

The issue will likely be discussed at an upcoming G20 meeting of the most advanced economies, following demands by both France and Germany, Reuters reported last week.

The two countries said the currencies "pose substantial risks for investors and can be vulnerable to financial crime." They are also worried it may increase financial instability.

On Monday, Rob Wainwright, the head of EU police agency Europol, told the BBC's Panorama that billions of euros in criminal money is being laundered using the virtual currencies.

The cryptocurrency also appears to be generating an energy shortage crisis in Iceland.

A spokesperson for Icelandic energy firm HS Orka told the BBC that the island nation is facing problems due to the electricity needed to mine Bitcoins.

The data centre mines are run by computers, which are connected to a global network and used to process transactions between cryptocurrency users. In return, the centres generate small Bitcoin rewards.

"What we're seeing now is ... you can almost call it exponential growth, I think, in the [energy] consumption of data centres," he was cited as saying in the BBC.

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