The central bank of Estonia stated this week that it believes Bitcoin (BTC) could act more like a Ponzi scheme than a virtual currency or an electronic payment system.

This has led the Estonian central bank to urge consumers to completely avoid the digital currency altogether because it does not provide any guarantees to the user.

Mihkel Nommela, head of the Estonian central bank’s payment and settlement systems department, told Bloomberg News on Thursday that bitcoin “is a problematic scheme” and that essentially “all risks are assumed by the user, who has no one to turn to for help.”

“All in all, virtual currency schemes are an innovation that deserves some caution, given the lack of any guarantees and responsible parties to back them in the longer term or evidence that this isn’t just a Ponzi scheme,” said Nommela.

Despite the cautionary warnings being issued by the central bank, the nation’s finance ministry has yet to establish regulations nor has it passed legislation to counter any risks that bitcoin, according to the central bank, might pose.

bitcoinThe Bank of Lithuania echoed Estonia’s sentiments regarding bitcoin. Vilius Sapoka, Director of the Financial Services and Markets Supervision Department at the Bank of Lithuania, told the news outlet, “Virtual currencies, such as Bitcoin, are unsupervised and unregulated, Those buying or using such currencies take all the risks and responsibility for possible losses.”

Estonia as well as Latvia and Lithuania suffered the worst recessions in 2007 and 2008 in all of Europe at the height of financial collapse. The economic crisis led the governments and central banks to increase regulatory powers to ensure its financial system is protected and that certain products cannot hurt its fragile finance sector.

This isn’t the first time that someone has made the case that bitcoin could very well be a Ponzi scheme. Gary North, an economist from the Austrian School, published a controversial article last month explaining that “bitcoins will go down in history as the most spectacular private Ponzi scheme in history. It will dwarf anything dreamed of by Bernard Madoff. (It will never rival Social Security, however.)”

North used the economics of Ponzi schemes and the Austrian Theory’s origins of money to make his conclusion.

Others like Robert Wenzel, publisher of Economic Policy Journal, say the rise of the cryptocurrency is nothing but a pump and dump scheme.

Source: http://www.pfhub.com/estonia-central-bank-warns-bitcoin-could-act-as-a-ponzi-scheme-334/

Originally posted 2014-01-31 05:33:50.

There has been a lot of recent news surrounding bitcoin in Russia and it’s confusing at best.

On one hand you have the head of Russia’s largest bank, Sberbank chief Herman Gref, a former finance minister who served under President Vladimir Putin from 2000 to 2007, who backs Bitcoin. He recently urged the Russian government to withdraw a bill which would limit the use of digital currencies in the country.

Meanwhile, privately-owned VTB banking group’s CEO Andrei Kostin was quoted in Davos as saying:

“Digital currencies are quite dangerous for the money market and therefore we have no plans to get involved. Russia’s monetary authorities are only now formulating their opinion about this”

Russia’s Central Bank says Bitcoin Users Can Face Jail Time

The Bank of Russia, the country’s central bank, slammed digital currencies Monday, warning that Bitcoin use can lead to criminal charges in the country. The anonymously produced “virtual currencies” can be intended by its producers for money laundering and terrorism funding purposes, the Central Bank said in a statement.

Their statements resemble the statements made by other central banks and governments throughout Asia and Europe.

The central bank has warned users that digital currencies are very high risk due to the fact they are not backed by any official bank or state entity. The statement asserts that there is also a high amount of risk due to the fact the value of digital currency is speculative in nature and exchanges are risky.

The bank stated that digital currencies should not be trusted due to their anonymous nature. This may lead users to unintentionally breaking the law by dealing with individuals utilizing digital currencies as a means of money laundering.

Included in the message was a reminder to the Russian people that issuing “alternative currencies” are prohibited by law. The follow was stated, “According to Article 27 of the Federal Law on the Central Bank of the Russian Federation (Bank of Russia) issuing monetary surrogates is prohibited in the Russian Federation.”

As far as the government is concerned, willful involvement in exchanges of digital currency means “potential involvement in the implementation of suspicious transactions.” While these statements seem clear, they create a mixed message for Russian bitcoin users.

This has left many wondering if the strong statements of the Central Bank are a result of the statements made by Gref. It is distinctly possible that Gref spoke out of place, and the Bank of Russia wanted to regain control of the situation by making it clear his comments do not reflect the position of the bank.

Source: http://www.josic.com/can-bitcoin-users-get-arrested-in848-russia

Originally posted 2014-01-31 05:22:11.

A gas station in the US now lets customers fill up with bitcoin, making it likely to be the first business that allows the purchase of fossil fuel using cryptocurrency.

The station has completed eight transactions since it began accepting bitcoin at the start of January, according to the store’s owner, Shahzad Sarwar.

“I started taking bitcoin, above all, to support the bitcoin community,” he said.

The gas station, in Greeley, Colorado, is called Cosmic Market and also has a convenience store attached. Here you will find proof of Sarwar’s fervent support for the digital currency writ large on the wall. “Bitcoin accepted here. Take the power back. Let the banks eat cake!” a poster proudly proclaims.

The number of Cosmic Market customers that have the ability to pay in bitcoin is tiny right now, but they are certainly happy that such a service exists. When Sarwar announced his unique ability to take bitcoin payments for fuel, one redditor commented on the thread:

“I have bought gas from here using bitcoin. I feel lucky living so close to one of the first gas stations in the country to accept bitcoin.”

It’s not just ideology that led Sarwar to start bitcoin transactions, though. Bitcoin payments could also potentially save him a significant amount on credit card transaction fees, he said.

Sarwar has a day job as a software engineer; the Cosmic Market is just a sideline and ending up as a gas station owner was never part of his life plan.

“I bought the store out of pure stupidity,” he said. “But I have learned a lot since. The gas station business is very competitive and it is very hard to make money,” he said.

As the first gas station owner to accept digital currency, it’s perhaps not surprising that Sarwar thinks differently in other ways too.

The strategy he has employed to increase profits at the Cosmic Market is to expand the retail floor space from 320 to 2,500 sq ft, and to stock what he calls ‘unique items’, such as insect candy and colourful smoking paraphernalia.

How about four wafers coated in white chocolate and studded with milk chocolate-covered ants? “It’s disgusting but I know you want one!” Sarwar wrote on the Cosmic Market blog.

“It’s just for fun and to make customers smile,” he said of the novelty snack. And if the urge takes you, you can buy that with bitcoin too, he adds.

Last July, CoinDesk asked whether bitcoin would ever be used at gas pumps. Shahzad Sarwar has now made that a reality.

Source: http://www.coindesk.com/pump-gas-for-bitcoin-in-the-us/

Originally posted 2014-01-31 05:09:19.