Cyprus Mail
Business Cyprus

Bitcoin use dangerous: CBC (Updated)

The Central Bank (CBC) has said use of virtual currency bitcoin is extremely dangerous, the Cyprus News Agency (CNA) said on Tuesday.

“Using any virtual money is extremely dangerous because they are not monitored by any authority, thus operating without control,” CNA said, quoting the CBC.

Bitcoin is a peer-to-peer digital currency that functions without a central authority and it was first introduced in January 2009 by a person known only as Satoshi Nakatomo.

The digital currency is stored in anonymous ‘electronic wallets,’or code, and can travel from one wallet to another by means of an online peer-to-peer network transaction.

Xinxua, the Chinese news agency, reported on Tuesday that after last week’s announcement on the dangers of bitcoin by Chinese authorities, the virtual currency plunged by 35 per cent.

China said “the country’s financial and payment institutions should not accept Bitcoin as legal tender, warning of the risks related with the digital currency”.

According to the report, an hour after the warning issued by the People’s Bank of China (PBOC), the price of one Bitcoin plunged by as much as 35 per cent from 6,970 (€834) yuan ( to about 4,500 yuan (€538) at BTC China, the main Bitcoin trading platform in China.

In November, bitcoin was the subject of a hearing by the US senate committee on homeland security and government. The committee deemed virtual currencies a “legitimate financial service” with the same benefits and risks as other online payment systems.

The senate committee responded to a recent incident, where U.S. authorities shut down the online black market “Silk Road” under charges of illegal trading in drugs and weapons. Investigators found that exchanges between Silk Road users were almost entirely conducted using Bitcoins.

In an internal memo revealed last year, the U.S. Federal Bureau of Investigation called Bitcoin trading sites “an alarming haven of money laundering and other criminal activities”.

In Cyprus, the University of Nicosia announced last month that it will be accepting bitcoin as a legitimate form of paying tuition.

A week after the announcement, Francois Rossouw, a student from South Africa, made a payment of 1 BTC, the equivalent of €670, toward tuition.

In a written response later on Tuesday, Danny Brewster the CEO of Neo & Bee, the largest business in the world that is building infrastructure around the Bitcoin technology, said he had been trying for the past two weeks to reach and arrange a meeting with the CBC so that it could operate under the appropriate regulatory framework.

“The use of Bitcoin carries risks like any other financial instrument. However, because Bitcoin is still only five years old, the infrastructure is still being developed,” said Brewster. “Bitcoins have value because they are useful, they can travel immediately and they cannot be reproduced by fiat, by anyone. I sincerely wish such transparent and free protocols were available by voluntary consensus to everyone.”
He added that the news release from the People’s Bank of China, was “heavily misinterpreted” and resulted in a temporary drop in the exchange rate of Bitcoin, “which today is again approaching $1,000”.

“Said statement, explicitly states that individuals and non-government businesses can transact freely with Bitcoin. In addition, Switzerland is soon holding the discussion at a parliamentary level, as to whether or not they should recognise Bitcoin as a currency,” added Brewster.
He said the largest company that is developing the infrastructure to make the use of Bitcoin safer, easier, more accessible and more stable is based in Cyprus. The company has already created many jobs and has outsourced even more with a structured plan to create hundreds more jobs over the months ahead, he added. “This is a once in a lifetime opportunity for Cyprus to become an innovative leader within the global financial services industry.”

 

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