G20 to work on 'answer' to Bitcoin risk

DAVOS: International regulators are looking at the risks poised by cryptocurrencies such as Bitcoin and will work on their response at their next G20 meeting in March, a European Central Bank director said on Friday.

“The international community is … preparing an answer to that and I would expect, for instance, the G20 discussion in Buenos Aires in March to focus very much on these issues,” Benoit Coeure, a member of the ECB’s board, said at an event at the World Economic Forum in Davos.

Bitcoin is a virtual currency created from computer code. Unlike a real-world unit such as the US dollar or euro, it has no central bank and is not backed by any government.

Instead, Bitcoin’s community of users control and regulate it. Advocates say this makes it an efficient alternative to traditional currencies because it is not subject to the whims of a state that may devalue its money to boost exports, for example.

Just like other currencies, Bitcoins can be exchanged for goods and services — or for other currencies — provided the other party is willing to accept them.

Bitcoin was launched in 2009 as a bit of encrypted software written by someone using the Japanese-sounding name Satoshi Nakamoto.

Last year secretive Australian entrepreneur Craig Wright said he was the creator of Bitcoin, but some have raised doubts over his claim.

Hundreds of other digital currencies followed but Bitcoin is by far the most popular, with an increasing number of merchants accepting digital currencies for payments.

Transactions happen when heavily encrypted codes are passed across a computer network. The network as a whole monitors and verifies the transaction in a process that is intended to ensure no single Bitcoin can be spent in more than one place simultaneously.

Users can “mine” Bitcoins — bring new ones into being — by having their computers run complicated and increasingly difficult processes.

However, the model is limited and only 21 million units will ever be created.