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Author Topic: [2014-07-05] EBA warns of more than 70 Bitcoin hazards  (Read 1846 times)
ganabb
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July 05, 2014, 03:50:32 AM
 #1

http://www.ft.com/cms/s/0/9b73f5c6-0387-11e4-817f-00144feab7de.html#axzz36YxgSqjt

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/9b73f5c6-0387-11e4-817f-00144feab7de.html#ixzz36YxrKZQI

Financial institutions across the EU should not buy, sell or hold virtual currencies, the region’s banking regulator has warned, as it attempts to ensure firms are “shielded” from the dangers of currencies such as bitcoin.

In an opinion addressed to lawmakers, the European Banking Authority argued that the potential benefits of such virtual currencies were outweighed by a long list of risks, which in the long term could only be fully addressed by a regulatory overhaul.

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July 05, 2014, 06:54:06 AM
Last edit: July 05, 2014, 07:18:09 AM by freedomno1
 #2

Low quality journalism deserves to be burned with fire Sorry have a small grudge against paywalls so adding alternative sourcing (Not that the article was bad just disliked its headliner)
Although it is the beginning of the month and I'm still in my 8 free Smiley
http://www.ftadviser.com/2014/07/04/regulation/eu-legislation/eba-steers-eu-banks-away-from-bitcoin-trade-8V11aYxvSs5JE378hgVc0L/article.html
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July 05, 2014, 07:14:46 AM
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Low quality journalism deserves to be burned with fire Sorry have a small grudge against paywalls so adding alternative sourcing
Although it is the beginning of the month and I'm still in my 8 free Smiley
http://www.ftadviser.com/2014/07/04/regulation/eu-legislation/eba-steers-eu-banks-away-from-bitcoin-trade-8V11aYxvSs5JE378hgVc0L/article.html

+1, the headline suggests its yet another scare piece on this. Most of those 70 risks are either risks that only apply to financial institutions or are unrealistic in open source development models and disregard the requirement for the majority of users to agree to changes.

FT has done a lot to support Bitcoin, they where one of the first big name publishers to regularly feature Bitcoin articles so its a shame to see them lagging so far behind in accepting bitcoin for micropayments or subscriptions.

Well actually I shouldn't be shooting the messenger FT is fine the problem was that it was a paywall for me.
The article I linked too talks about what the EBA said today (European Banking Authority) and their opinions.

In an opinion addressed to lawmakers, the European Banking Authority argued that the potential benefits of virtual currencies such as Bitcoin are outweighed by a long list of risks, which in the long term could only be fully addressed by a major regulatory overhaul.

Immediate action should include dissuading financial institutions such as banks from purchasing Bitcoin and other e-currencies, and declaring virtual currency exchanges ‘obliged entities’ which must comply with anti-money-laundering and counter-terrorist financing rules.

However the EBA said financial institutions should continue to be allowed to maintain a current account relationship with businesses active in the field of virtual currencies, and that virtual currency schemes should be permitted to innovate and develop outside the perimeter of the financial sector.

In its opinion the EBA set out more than 70 hazards surrounding virtual currencies, including accounts being hacked, counterparties failing to meet payment terms, users losing their passwords, failures by virtual currency exchanges, and criminal and terrorist activity.

It did make me want to look up the 70 reasons but I couldn't find them listed anywhere.
So instead here is a bloomberg video
http://www.businessweek.com/videos/2014-07-04/european-banks-advised-to-shun-bitcoin

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July 05, 2014, 07:31:19 AM
Last edit: October 29, 2015, 11:27:23 PM by stan.distortion
 #4


...

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July 05, 2014, 08:00:28 AM
Last edit: July 05, 2014, 07:00:30 PM by bitbouillion
 #5

Read how well Cyprus banks passed their stress tests:
European Bank Accounting Is A Joke

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July 05, 2014, 10:11:59 AM
 #6

Thanks Stan for posting the pamphlet.

I was reading through it and most of those risks are not limited to cryptos, they are also true to fiat and other investments. Some "risks" are duplicated and some not even risks at all, it is plain user stupidity.

Basically, their grounds are thin and they need to reiterate the same points three times to fill up two pages.
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July 05, 2014, 10:19:44 AM
 #7

http://www.project-syndicate.org/blog/european-bank-accounting-is-a-joke-by-christopher-t--mahoney
Bypassed paywall


European Bank Accounting Is A Joke

On Sunday, Europe introduced the “Cyprus Doctrine”, which says that uninsured deposits are risk assets and that uninsured depositors are “investors”. The deposit claim has been transformed into a capital instrument. Henceforth, holders of uninsured deposits in European banks are supposed to do their homework, and make sure that they are not investing in uncreditworthy banks.

Connoisseurs of European bank regulation may recall that market discipline was one of the original “Basel Pillars” along with prudential supervision and capital adequacy. And now its exists as a real pillar. Advocates of free markets and financial deregulation should applaud the introduction of the Cyprus Doctrine. (I would call it the “Dijsselbloem Doctrine” if I could spell or pronounce it. The Dutch need SpellCheck.) Indeed, the anti-regulation WSJ is just thrilled with the Cyprus Doctrine: “This is a useful lesson in the limits of government guarantees and a welcome blow against moral hazard”.

Banks won’t need to be regulated anymore because they are outside the safety net. Instead, depositors will police the banking system, rewarding the strong and punishing the weak. Bad banks will be weeded out; we will have fewer but better banks. Taxpayers and legislators will no longer need to pay attention to the industry. Banks can be set free.

There is only one problem with European “depositor discipline”: European bank accounting and disclosure is a joke. There is little relationship between a European bank’s creditworthiness and its financial reporting. Both dead Cyprus banks were solvent according to their latest financials, and both passed the European Banking Authority’s 2011 stress test. I think that both Bankia and Banca MPS passed as well: I think everyone passed. The stress test was a joke. It was calibrated to pass everyone. All European banks are created equal--until they fail.

How are depositors supposed to be able to know where to put their money? You might think they could use bank ratings, but most European banks aren’t rated by Moody’s or anyone else. And Moody’s is not clairvoyant; it has to use the same bogus financial disclosure as everyone else. Bank executives seldom blurt out the fact that they are insolvent. Insolvent banks lie about their asset quality to anyone who will listen. They certainly lied to me when I was in the business. I found that one of the best sources of information about insolvent banks was market rumor and anecdote. Not actionable information, but more useful than the lies the banks told.

If you don’t believe that insolvent banks lie about their condition, read the annual report for any one of the banks which have had to be bailed out in the past few years. Not one of them said that they were insolvent, or that their loan portfolio was full of holes, or that their CDOs were mismarked, or that they were becoming illiquid. And I would add that European bank regulators act as advocates for their banks. They take criticism of their banks personally. Are these regulators now supposed to issue press releases pointing out which of their banks are no good and should be avoided at all costs?

I can’t help making one other observation that will make me sound arrogant. I have been a bank analyst since 1978. I have been following bank regulation for 35 years. Although I may be demented, I remember the lessons of those 35 years, the most important of which is that bank deposits make up most of the money supply and, as such, are contingent liabilities of the central bank. If you screw around with bank deposits, you are screwing around with the money supply which drives nominal growth. You can’t introduce depositor discipline while expecting economic growth. It’s one or the other.

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July 05, 2014, 10:54:49 AM
Last edit: July 05, 2014, 11:36:19 AM by qwerty555
 #8

re European Bank ratings.

Although somewhat controversial Martin Weiss produces the Weiss ratings for most banks including Eurozone..it used to be free but now it seems you have to pay but snippets can be found on web articles. Previously his claim to fame was bull on Gold and gold miners when it was $300/oz and forecasting the housing , Banks and market crash of 2008 ( 4 years early)  and that it was a truly independent rating service not sponsored by any financial inst. /Bank  ( he has also had some big timing misses  too)

Hers is an example or two or three Smiley

http://www.weissratings.com/news/bank/060412-europe-and-asia-home-to-weakest-global-banks.aspx


The company says that five European countries in particular -- Portugal, Ireland, Italy, Greece and Spain -- are home to a large number of the worst-performing banks in the world. According to Weiss, 75 of 206 major banks surveyed -- about 42% -- call one of the so-called “PIIGS” countries home, along with France and Germany. Each of those 75 banks receives a bottom scraping D+ rating from Weiss.
http://www.bankingmyway.com/credit-center/where-worlds-strongest-banks-are-not-us-not-europe

http://www.weissratings.com/news/press-releases.aspx



EDIT.. It seems parts of the report are still free but you need to register

https://www.weissratings.com/banking-industry-research/gbr-regional-aggregates.aspx



http://www.weissratings.com/Login.aspx?a=s

http://www.weissratings.com/news/bank/062714-weiss-ratings-upgrades-959-banks-downgrades-604.aspx
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July 05, 2014, 03:03:38 PM
 #9

If EBA can state the same risk twice under different categories, then I can think of several trillion risks to the European banking system  Cheesy

Vires in numeris
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July 05, 2014, 10:14:15 PM
 #10

Risk pamphlet:


(from post by abercrombie here:
https://bitcointalk.org/index.php?topic=178336.msg7674914#msg7674914 )

EDIT: Most that apply to users are only relevant to the alts and have no relevance to Bitcoin or assume the user needs to be protected from their own stupidity. The report also appears to be out of date, they haven't taken into account already implemented features such as multisig or ongoing development that addresses many of the raised issues.

What a joke. You could exchange words fiat and VC one almost all of those. The biggest threat on there was the last one. That is a huge risk to them and a win for the rest of us.  

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July 05, 2014, 11:09:01 PM
 #11

In an opinion addressed to lawmakers, the European Banking Authority argued that the potential benefits of such virtual currencies were outweighed by a long list of risks, which in the long term could only be fully addressed by a regulatory overhaul.

This statement is wrong, and contradicts itself.  If the risks outweighed the benefits then Bitcoin would have been abandoned by most long ago, and there would be no need for regulation.  In fact, the exact opposite is true - it is despite any number of risks (70? Yeah whatever) the benefits far outweigh them.  It is for that reason that Bitcoin is such a threat, and people realize that.  It's the EBA that's scared because they now see it too.

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July 07, 2014, 07:02:17 AM
 #12

Well, yes, we believe you and then you will again endlessly print their unsecured paper
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July 07, 2014, 09:25:59 AM
 #13

Risk pamphlet:


(from post by abercrombie here:
https://bitcointalk.org/index.php?topic=178336.msg7674914#msg7674914 )

EDIT: Most that apply to users are only relevant to the alts and have no relevance to Bitcoin or assume the user needs to be protected from their own stupidity. The report also appears to be out of date, they haven't taken into account already implemented features such as multisig or ongoing development that addresses many of the raised issues.

What a joke. You could exchange words fiat and VC one almost all of those. The biggest threat on there was the last one. That is a huge risk to them and a win for the rest of us.  

Applies all of these to Fiat Banks in some countries
Same risks lol.

@ Thanks Stan Nice Find
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July 07, 2014, 02:59:07 PM
 #14

Risk pamphlet:


(from post by abercrombie here:
https://bitcointalk.org/index.php?topic=178336.msg7674914#msg7674914 )

EDIT: Most that apply to users are only relevant to the alts and have no relevance to Bitcoin or assume the user needs to be protected from their own stupidity. The report also appears to be out of date, they haven't taken into account already implemented features such as multisig or ongoing development that addresses many of the raised issues.

What a joke. You could exchange words fiat and VC one almost all of those. The biggest threat on there was the last one. That is a huge risk to them and a win for the rest of us.  

Applies all of these to Fiat Banks in some countries
Same risks lol.

@ Thanks Stan Nice Find

I like the last risk.  VCs may become so prevalent that the central bank loses monetary control Smiley

If you liked this post buy me a beer.  Beers are quite cheap where I live!
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July 07, 2014, 11:53:11 PM
 #15

Risk pamphlet:


(from post by abercrombie here:
https://bitcointalk.org/index.php?topic=178336.msg7674914#msg7674914 )

EDIT: Most that apply to users are only relevant to the alts and have no relevance to Bitcoin or assume the user needs to be protected from their own stupidity. The report also appears to be out of date, they haven't taken into account already implemented features such as multisig or ongoing development that addresses many of the raised issues.

What a joke. You could exchange words fiat and VC one almost all of those. The biggest threat on there was the last one. That is a huge risk to them and a win for the rest of us.  

Applies all of these to Fiat Banks in some countries
Same risks lol.

@ Thanks Stan Nice Find

I like the last risk.  VCs may become so prevalent that the central bank loses monetary control Smiley

That's the only risk that is unique and makes sense, except for the part that the central bank "steers" the economy.


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July 08, 2014, 12:08:45 AM
 #16

You hit it right there ...

"VCs may become so prevalent that the central bank loses monetary control "

BINGO

I expect a day will come when the television 'programing' of the world will tell everyone how cool it is to use btc and then the party will really start.

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July 17, 2014, 09:05:30 AM
 #17

Bringing this back up since I just remembered something

The EBA may have published a report but this was already discussed in 2011 Smiley

Ideal Properties of Decentralized Digital Commodity
If we had the ability to design and implement an ideal form of digital commodity money, what would it look like? How does Bitcoin currently compare?

https://en.bitcoin.it/wiki/Ideal_Properties_of_Digital_Commodities

I will admit though that they put more effort into theirs lol.
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July 17, 2014, 10:14:19 AM
 #18

Risk pamphlet:


(from post by abercrombie here:
https://bitcointalk.org/index.php?topic=178336.msg7674914#msg7674914 )

EDIT: Most that apply to users are only relevant to the alts and have no relevance to Bitcoin or assume the user needs to be protected from their own stupidity. The report also appears to be out of date, they haven't taken into account already implemented features such as multisig or ongoing development that addresses many of the raised issues.

Simply not being stupid and reading a bit before getting into bitcoin will spare you from most of the "High" risks...
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July 17, 2014, 04:18:23 PM
 #19

Read how well Cyprus banks passed their stress tests:
European Bank Accounting Is A Joke

"Banks warn about Bitcoin!"
Is anyone actually surprised about this?

Bitcoin replaces Banks!  Smiley
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