The European Supervisory Authorities (ESAs) for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) issued a pan-EU report to warn consumers on the risks of buying virtual currencies. The ESAs’main concern is the increasing demand of virtual currencies by etherogeneous customers, often unaware of the underlying risks.
First of all, the price of virtual currencies is extremely volatile, and already showed signs of pricing bubbles. Customers must be warned that the consequences of large drops in prices will result in severe losses in their virtual portfolios.
Secondly, common trading platforms are not regulated under EU law, hence no protection associated to financial services is provided for EU consumers. As an example, a cyber-attack stealing virtual money from target exchange will not provide any cover to the consumers losses under the EU jurisdiction.
Furthermore, many virtual currencies exchanges have been subject to severe operational problems in the past. Consumers were not able to execute their buy/sell orders when they wanted, and suffered losses from the (high) fluctuations in such periods.