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Estonian central bank warns against digital money

Jan 23, 2014
From wire reports, TALLINN

The Estonian central bank has warned people should be cautious using digital money despite its popularity rising in the country

Eesti Pank's Mihkel Nõmmela said that issues concerning Bitcoin and virtual currency come with warnings as the system is not regulated whilst internet security poses a threat.

"According to current evaluation, virtual currency poses no danger to price or financial stability, considering its limited scope of usage," said Nõmmela.

Nõmmela drew attention of consumers to several risks accompanying the use of virtual currency:

"First it is a sphere that is not regulated and no institution carries out supervision over it; secondly, the Bitcoin virtual currency or encrypted currency scheme is problematic since the owner of the scheme cannot be identified, the creation of money is not understandable and the price of the virtual money or exchange rate is very unstable, having fluctuated in the range of 400-900 euros per Bitcoin in the last 1.5 months. Also it is possible to very easily lose the money when the computer lacks the necessary antivirus protection or recovery possibilities." said Nõmmela.

He added: "In short we can say that it is an innovation that one should have certain carefulness about, considering that there is no guarantee and responsible party for guaranteeing such virtual currency in a longer time horizon or that it wouldn't be just a simple pyramid scheme," 

A statement from the Bitcoin website claims the website has a strong security track record. 

"The Bitcoin network is probably the biggest distributed computing project in the world. Bitcoin's most common vulnerability is in user error. Bitcoin wallet files that store the necessary private keys can be accidentally deleted, lost or stolen. This is pretty similar to physical cash stored in a digital form. Fortunately, users can employ sound security practices to protect their money or use service providers that offer good levels of security and insurance against theft or loss."

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