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Hungarian Central Bank Warns of Bitcoin & Cryptocurrencies’ Risks

Last Updated March 4, 2021 4:53 PM
Samburaj Das
Last Updated March 4, 2021 4:53 PM

The National Bank of Hungary (MNB) has issued a public statement warning citizens who use or invest in cryptocurrencies such as bitcoin, citing their unregulated nature amid increasing instances of high-return investment schemes abusing the cryptocurrency.

Roughly translated, the warning  read:

The so-called cryptocurrency issuers typically operate via the web with extensive marketing tools and the promise of high yields, targeting uninformed users into the system (scheme).

Published yesterday, the MNB warned users looking to invest in virtual currencies that they are outside the purview of any authority due to their unregulated framework. The warning comes after the monetary authority claimed to receive numerous complaints from users engaging in cryptocurrency activity, particularly online high-yield schemes promising big returns through digital currencies.

The public warning specifically mentions bitcoin, reminding users of no guarantees of consumer protection against losses.

It states:

In the case of bitcoin and similar devices used in virtual payments, a lack of adequate liability and warranty could lead to losses due to abuse.

The warning also reminded users that there is no institution guaranteeing the execution of a transaction or the reimbursement of payment. Furthermore, the authority warned users about drastic price changes and unpredictability with cryptocurrencies.

The notice also pointed to the altcoin OneCoin – frequently pointed to as a scam – which it deemed a pyramid scheme. Here, the scheme purports to allow investment in assets but really functions with those issued solely by a central entity, an example of a ‘closed stock market’, the warning adds.

The central bank’s warning is similar to those issued by other financial regulators or authorities in other countries, such as Kenya and Vietnam. The Central Bank of Kenya also picked out bitcoin in a public announcement warning users against adopting the cryptocurrency. The fallout from a collapsed pyramid scheme in Vietnam saw the country’s government warn its citizens against using bitcoin.

A Belgian Financial Services and Markets Authority warning was particularly pointed toward OneCoin. As was an official warning from the UK’s Financial Conduct Authority in September 2016, which revealed that the City of London Police was investigating OneCoin.

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