After their inception in 2009, cryptocurrencies were the Wild West of the financial world. Without any government oversight or regulation and no financial institutions to back the value of the currency, it was a free-for-all, and digital currencies rose in value almost exponentially for a short period of time, only to plummet weeks or months later.
It is these kinds of concerns that have led the Bank of Spain to issue a warning to consumers involved in the trading of the digital currencies. In a post provided on the site’s education page for investors, the bank explained that there are currently no laws in place that govern cryptocurrencies. This, they explained to consumers, creates a high risk of fraud or theft for which there may be no legal or other types of remedy for consumers.
Bitcoin was the first cryptocurrency, joining the market in 2009. In recent years, after being hi-jacked by self-interested developers, Bitcoin Core (BTC) has seen its value rise significantly, but has also undergone a number of price fluctuations that concern many financial analysts. In December 2017, BTC reached a value above $19,000 from a starting price of $978 near the end of 2016.
However, by November 2018, the value had decreased to $4,463, more than 75% decrease from its peak 11 months earlier. For investors who held BTC prior to December 2016, they still reaped a nearly 400% profit, but those who jumped on board during 2018 likely saw a significant drop in their financial portfolio.
The timing of this warning is interesting, considering that at the recent G20 summit in Buenos Aires, Argentina, the 20 member nations came to an agreement that there needed to be greater regulation on all cryptocurencies.
Spain is not part of the 20 member group, meaning that their warning to investors may be a caution that regulations may soon be imposed that neither the Spanish government nor its financial institutions played a part in creating. There may also be concern that these regulations will not directly affect those living in Spain, meaning that no regulation will exist for consumers of the nation.
The concern is that without any financial regulation and no real record of how much digital currency there is or who owns it, the potential for fraud and theft is at an all-time high. With their value rapidly increasing, it would not be surprising to see more nations beyond the G20 choose to start creating regulation governing cryptocurrencies.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.