EU Banking Authority Supposedly Bashes Bitcoin

Journalist:
Samuel Barnes @gravysam
July 5, 2014

The EUBA (European Union Banking Authority) has supposedly warned that the risks of digital currencies strongly outweigh the positives that they could potentially offer in an “opinion” report they published yesterday (4th July). News outlets jumped on this report as hostile to the emerging cryptocurrency technology, someone who has fully read and studied the report would likely disagree with this paraphrased assumption.This fact has been noticed by many observers in the community. The report also covers many benefits of digital currency and urges further investigation as they mature and develop. In fact, the report is a very level-headed and sober assessment and explanation of cryptocurrency as it stands today.

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The document states that the EUBA is responsible for monitoring and advising in regard to ongoing financial innovations detailing in the document that virtual currency(VCs) became one of the things on the authority’s radar to warrant investigation, as a result, of cryptocurrency getting increasing attention in September 2013. However, the report still asserts that their approximations of the number of transactions carried out show that “VC’s (virtual currency’s) [transactions] have never exceeded the number of 100,000 per day across the globe compared to approximately 295 million conventional payment and terminal transactions per day in Europe alone”.

The document goes to great lengths to attempt to explain the ins and outs of the digital currency in circulation to a traditional financial mindset, and does a very good job at this. The document is one I would actually recommend to someone looking to learn about the situation and wider application of cryptocurrency at this particular point in time, five years on from Satoshi’s original paper.

The document raises a comprehensive list and explanation of the pros and cons of digital currency at this time, the main negative covered are as follows:

  • No Cryptocurrency is legal tender in any jurisdiction
  • Digital currency is non-redeemable, even though I doubt The Bank of England would exchange a £20 note for £20 of silver
  • Mining groups that control more than half the network computational power can potentially interfere with transactions (also known as a 51% attack)

These negatives as perceived negatives as defined by the EUBA and nothing new to the wider cryptocurrecy community, one of which has already been tackled by some who have backed up cryptocurrency with tangible assets or guaranteed buyback prices. The central positives noted in the document are as follows:

  • Cryptocurrency offers a very low transaction fee, or by the EUBA’s assessment the lowest of any financial platform: “VC (virtual currency) transactions can be achieved at lower costs than any other means of payment [at 1% typically].” The report puts this down to the lack of intermediaries (middlemen) and compares this to the 2%-4% charges that are required to use traditional methods.
  • Virtual currency is faster than fiat currency: “for Bitcoins the total process time is said to be between 10 and 60 minutes. The document also notices that current fiat financial services don’t operate 24/7 like cryptocurrency.
  • No chargebacks, this helps merchants negate consumers fraudulently withdrawing payments once goods or services are delivered. But the document also rightly details this leads to a lack of error, fraud and consumer protection.
  • Virtual currency isn’t region specific like fiat currency.

Featured image by Shutterstock.

Samuel Barnes @gravysam

Computer Science Student. Excited for the future of cryptocurrencies.