ECB “dismissive” of bitcoin

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Virtual Currency Systems (VCS) are flawed and unstable, and could present real problems to established financial systems if they continue to grow in popularity, says a new report by the European Central Bank.

The report also adds that the ECB “does not regard virtual currencies, such as Bitcoin, as full forms of money as defined in economic literature. Virtual currency is also not money or currency from a legal perspective.”

VCSs also “present several drawbacks and disadvantages for users”, according to the report, including “lack of transparency, clarity and continuity; high dependency on IT and on networks; anonymity of the actors involved; and high volatility.”

Other worrying areas, it says, include the counterparty risks that arise from anonymous payees, exchange rate risks and risks of investment fraud.

However, as the Wall Street Journal’s BitBeat has pointed out, the report completely ignores the striking developments of the past year, including a swathe of “Bitcoin 2.0” applications and other digital currency innovations.

What’s more, there was “close to zero discussion of the many non-currency uses for blockchain technology now being developed,” said BitBeat, and the report “hardly addressed the notion, widely discussed in both crytpocurrency and financial circles, that digital currencies could play a back-office role in the financial system even if they are shunned by mainstream consumers and businesses.”

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