Regulators warn against using bitcoins

RISKY BUSINESS: The FSC and central bank say that the virtual currency is volatile and, as it is not issued by a monetary authority, it does not have legal protection

By Crystal Hsu / Staff reporter





The central bank and the Financial Supervisory Commission yesterday warned against bitcoin use in Taiwan, saying the virtual currency does not enjoy legal protections.

The regulators also said they may take necessary steps if financial institutions engage in bitcoin business, according to a joint statement issued yesterday.

The warning came after several monetary and financial regulators around the world have made similar moves in recent weeks to discourage bitcoin transactions, as the digital money gains in popularity and value.

“Bitcoin holders are on their own, as the currency is not issued by any monetary authority and is therefore not entitled to legal claims or guarantee of conversion,” the regulators said in the statement.

Bitcoin is not a real currency or a commonly accepted payment tool given its volatile values and its inability to be used for book-keeping or debit purposes, they said.

The official currency, the New Taiwan dollar, is guaranteed all legal protections, according to the statement.

Central bank Governor Perng Fai-nan (彭淮南) said last month he and his colleagues have kept a close watch on the development of bitcoin and compared its transactions to deals in precious metals.

The central bank and the commission have not issued warnings against investment in gold or other precious metals.

The two regulators painted bitcoin trading as highly speculative, and said holders should watch out for drastic volatility, malicious default, hacker attack, Internet theft and other risks.

Transactions in the virtual currency could also be connected to money laundering, smuggling, drug trafficking and other illegal activities, they said. However, SinoPac Financial Holding Co (永豐金控) earlier lent support to investment in bitcoins, saying it is to increase in value and popularity, in keeping with the fast-growing prevalence of e-commerce.

Transaction risks are minimal and bearable like all other investment instruments, SinoPac Financial chief economist Jack Huang (黃蔭基) said on Dec 4.

Meanwhile, a Taiwanese online shopping service operator plans to start accepting the virtual currency on its shopping site tomorrow and welcomes Beijing’s ban on Chinese financial institutions handling bitcoin transactions, because it could create new business opportunities.

Chinese people who possess bitcoins are expected to be more willing to use the digital money for online shopping because it’s harder for them to take advantage of appreciations in the currency’s value since the People’s Bank of China imposed the ban on Dec. 7, according to sources at Wayi International Digital Entertainment Co (華義國際).

However, given the volatility of bitcoin’s value, the company will limit its holdings of the new type of payment instrument to control risks.

Additional reporting by CNA