International regulators and central banks recently warned about the risks associated with bitcoin, the digital currency that has become tender for college tuition and purchases.
Chinese and French officials, as well as EU officials, voiced concerns about the potential for money laundering and speculative trading in bitcoin, The Wall Street Journal reports.
“Even if bitcoin does not today meet the conditions to become a credible means for investment that could therefore threaten financial stability, it represents a clear financial risk for those that hold it,” France’s central bank said, according to The Wall Street Journal.
Merchants around the world accept bitcoin as a form of payment, and a university in Cyprus announced recently that it had accepted its first tuition payment in bitcoin.
Bitcoin is not backed by a government guarantee but is created through a computing process referred to as mining. After bitcoins are mined, they can be used to make purchases or to trade on unregulated online exchanges, The Wall Street Journal reports.
Bitcoin values have soared, rising from less than $20 in January to the current value of approximately $900, based on the CoinDesk index.
The People’s Bank of China said on its website that banks should not take deposits from bitcoin-related businesses. Chinese regulators said online exchanges will be required to file records and make an effort to address money-laundering risks, according to The Wall Street Journal.
Michel Barnier, the European commissioner responsible for financial regulation, said penalties should apply if unregulated currencies like bitcoin are used in criminal activity.
U.S. officials have also voiced concern about digital currency in recent months. Approximately 35 virtual currency companies have registered with the Financial Crimes Enforcement Network since the Treasury issued guidelines in March encouraging them to do so, The Wall Street Journal.