Regulators Taking Dim View of Bitcoin Boom

YERUSHALAYIM (Reuters) -

Israel said on Wednesday it was considering regulation of bitcoin and warned citizens that using such decentralized virtual currencies was risky.

As a crypto-currency, bitcoin is passed between two parties digitally and can be traded on exchanges for real-world currencies. Its value fluctuates according to user demand, but it is not backed by any government or central bank.

Supporters of bitcoin are drawn to its decentralized platform and say it is here to stay. Detractors call it a bubble and expect it to be forgotten in a year or two.

However, it has proved increasingly popular and governments and regulators around the world have been searching for the best way to respond.

Israel, home to pioneering firms in hi-tech fields such as cryptography, has emerged as a bitcoin hotspot, prompting central bank governor Karnit Flug to convene a meeting this week with other regulators, including those for capital markets, taxes, securities and money laundering and terror financing.

“It was agreed to continue to examine various perspectives related to the use of, and trade in, virtual currencies,” the authorities said in a joint statement on Wednesday.

They said the Israeli public should be aware that bitcoin is unsupervised, is not legal tender and presents fertile ground for fraudulent activities. At the same time, such transactions are anonymous and often hard to trace, they added.