Bank of France Warns of Bitcoin's Volatility

French central bankers have joined their Chinese counterparts in issuing a warning against the risks of bitcoin trading.

On Thursday, France's central bank warned that the price of bitcoin is inherently volatile, and that some users may find it difficult to convert their bitcoins into real money.

Reuters reported

that the warning also addressed anonymity: the bank highlighted the fact that bitcoin's anonymous and unregulated nature made it suitable for money laundering and even sponsoring terrorism.

The bank stressed that bitcoin isn't a credible investment vehicle yet, and that it does not pose a threat to financial stability, but, importantly, that it also poses a risk for those who choose to invest.

The warning echoes statements made by former Fed Chairman Alan Greenspan, who recently told Bloomberg that bitcoin is still a risky personal investment, due to the fact that it has no intrinsic value.

The Chinese central bank issued a warning along similar lines earlier this week, citing mass speculation in bitcoin as a source of concern.

The Bank of France also raised the issue of speculation – warning that speculating on the price of bitcoin could be very costly for investors, as rampant speculation could lead to less demand and an eventual collapse.

This is a valid argument backed by many bitcoin supporters who see hoarding and speculation as the biggest threats to the development of a healthy bitcoin economy.

Interestingly, the bank also warned retailers and service providers that choose to accept bitcoin that they run the risk of being unable to cash in their bitcoin for real money.

This is perhaps the most interesting part of the statement, as it is direct address to the e-commerce outfits that are embracing bitcoin in ever-growing numbers.

It's interesting to note that the European Commission does not appear to have a clear stance on bitcoin.

The commission insists that all those involved in illegal activities using bitcoin should face penalties, but in essence this position is largely meaningless, as it already applies to 'regular' currency.

Paris image via Shutterstock