The central bank of Albania has published a public notice warning potential investors against buying or adopting digital currencies like bitcoin.
In a notice titled ‘On the risks associated with the use of virtual currency’, the Bank of Albania addressed the growing interest in digital currencies like bitcoin. More pointedly, the central bank revealed that no financial entities – presumably bitcoin exchanges – were licensed to operate in the country.
“The Bank of Albania has not licensed any financial entity whose activity includes also virtual currencies,” the official notice from the governor’s office at the central bank read. “Consequently, the companies involved in this activity in the Republic of Albania are not licensed, and therefore their activity is not subject to the regulatory and supervisory framework of the Bank of Albania.”
The public notice echoes statements made by other central banks around the world, including the likes of India.
The Bank of Albania’s statement lists – in particular – five risks that the institution sees the public to be made aware of when it comes to investing in digital currencies.
- The volatility in the value of cryptocurrencies. “Currencies’ value can be manipulated, cuasing the investor to face a significant loss beyond his control. Also there is a great possibility that due to the counterparty liquidity shortfall, the virtual currency might never convert back” to fiat currency.
- The unregulated and sometimes unknown exchangers of virtual currencies. “Anyone who invests their money in virtual currency exchanged by these companies will face the risk of loss.”
- Open to cyberattacks. The central bank compared the lack of coverage or protection against losses at digital currency exchanges, compared to traditional mechanisms like the ‘deposit insurance fund in banks’. “[T]he investment becomes unsafe and it can be attacked at any given time by hackers and lose forever, without any recoverability.”
- Anonymity could lead to illegal activities, “such as money laundering, terrorism financing, or smuggling of goods.”
- KYC software and frameworks at exchanges aren’t subject to any existing laws and regulations. This, the central bank argues, means “there is no guarantee that these [user] credentials will be safely administered to avoid their theft or misuse.”
In stating their above concerns, the central bank warned the public:
We appeal the Albanian public to be cautious and responsible when administering the savings or liquidity they own. It should direct the investments towards financial products and instruments provided by institutions that are licensed and supervised by the Bank of Albania and the Financial Supervisory Authority.
Any moves toward regulation or clear legal structures for digital currencies like bitcoin from the Bank of Albania are currently unknown.
The public notice and general hostile stance toward decentralized digital currencies joins a number of other similar opinions expressed by central bankers around the world. On the flipside, this is nothing new for bitcoin adopters who value the global cryptocurrency precisely for its decentralized, borderless nature.
Featured image of Tirana city from Shutterstock.