Last updated on July 31st, 2014 at 02:52 pm
The central Asian nation of Kyrgyzstan, which has been marred in domestic strife for a few years now, has become the latest country to vilify and condemn the peer-to-peer decentralized digital currency bitcoin. The National Bank of the Kyrgyz Republic issued the latest consumer alert warning about the widespread adoption of bitcoin and other virtual currencies.
In a press release issued by the central bank, the only legal tender permitted within the borders of the country is the som. Meanwhile, the use of cryptocurrencies like bitcoin as a method of payment would be in violation of its laws.
Furthermore, the central bank outlined a number of concerns and issues that the general public should be aware before they delve into the world of digital currencies. The risks and threats are pretty much similar to what other countries and states have listed previously.
The first concern is that bitcoin has been described as maintaining a lack of security.
“Nobody has obligations on this ‘virtual currency’ and they do not have the material (financial) support. As opposed to the traditional paper-based or non-cash money held in banks, such “virtual currency” does not have a tangible material expression, operates on the basis of distributed electronic networks and their circulation is carried out only within that network.”
The second risk is that there isn’t any genuine value of digital currency.
“Operations on their purchase-sale and exchange for other traditional currencies can be provided through special terminals, so-called ‘bitcoin ATM’, or so-called ‘virtual exchanges’ or ‘exchange offices’, where the formation of prices and the exchange rate of ‘virtual currency’ is realized. The cost of ‘virtual currency’ is not tied to any currency or other asset, and, in fact, the formation of its cost is influenced by demand and supply for it, that creates high risks of exchange rate volatility and loss of value.”
The third threat is the potential risk in calculations in acquiring digital holdings.
“Purchasing of ‘virtual currency’ is made directly, without the mediation of any financial institutions. Cancel of transactions is impossible. Due to the fact that the system has no control center, it is impossible to appeal or cancel unauthorized transactions. If payment has been made, but the service or goods were not received, there is no guarantee of refund. In case of theft of ‘virtual currency’ it is impossible to get it back because in the ‘virtual currency’ system the personality of its members are anonymous and reverse transaction without the consent of both parties is not possible.”
The central bank concluded that bitcoin is not regulated by any government or central bank in the world. Also, since virtual currency operates on a peer-to-peer network, it makes private or public regulations rather difficult, despite the ongoing regulatory frameworks being established in different regions of the world.
In the end, the National Bank of the Kyrgyz Republic believes residents should refrain from entering into this cryptocurrency market – whether it’s through purchasing, receiving in exchange for goods and services or participating in bitcoin operations – because of the aforementioned list.
It warned that anyone who involves themselves with bitcoin faces the “negative consequences of the possible violation of the legislation of the Kyrgyz Republic.”
Please note: the translations have been edited for clarity.