The Bank of Israel is considering clamping down on the use of “bitcoins” with stiff regulations and warned the public on Wednesday to beware of possible fraudulent use of the virtual currency.
The bitcoin is a digital currency, but its value is determined by demand. It is worth about $635 today, but was valued at $1,000 late last year and as little as $150 this past September.
Bank of Israel Governor Karnit Flug issued her warning following the bitcoin’s popularity that has attracted several start-ups to allow the bitcoin to be used to buy everything from soup to shares on the stock market.
The bitcoin “is liable to be exploited for criminal activity, including money laundering, financing illegal activities and financing terrorism,” the Bank stated.
“It was agreed to continue to examine various perspectives related to the use of, and trade in, virtual currencies. These perspectives include possible macro effects, their legal standing, their regulation, money laundering and terror financing risks, taxation and consumer protection.”
The statement added, “It is emphasized that they [bitcoins] are also not legal tender of any country, and that the term used does not indicate any legal status as ‘currency.’”
It also pointed out that bitcoins, since they are only virtual currencies and are stored on smartphones or computers, are subject to robbery through hacking.
Regulators in the United States , Canada, the European Union and elsewhere, who have published similar warnings to the public.
However, all the warnings may be superfluous. Wired.com reported Wednesday that a computer glitch at Mt. Gox, once the world’s biggest bitcoin exchange, has scared bitcoin owners.
Mt. Gox said two weeks temporarily stopped allowing customers to withdraw bitcoins, stating that the glitch in bitcoin software affected it and another exchange. The result was a dive in the value of bitcoins at Mt. Gox although it has remained steady elsewhere.
About the Author: Tzvi Ben Gedalyahu is a graduate in journalism and economics from The George Washington University. He has worked as a cub reporter in rural Virginia and as senior copy editor for major Canadian metropolitan dailies. Tzvi wrote for Arutz Sheva for several years before joining the Jewish Press.
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