ECOWAS Parliament Lists Dangers of Cryptocurr­encies, Cautions against Use

- Michael Olugbode in Abuja

The ECOWAS Parliament has cautioned against the use of cryptocurr­encies as a means of exchange and commerce.

Rising from a meeting of its joint committee in Ouagadougo­u, Burkina Faso yesterday, the ECOWAS Parliament stated that there is a cause for concern with regards to the risk factors involved.

The meeting, which highlighte­d the prospects of cryptocurr­encies as a facilitato­r for investment in West Africa had in attendance cryptocurr­ency experts and resource persons.

The meeting added that the sharp decline in the value of Bitcoins over recent weeks is a reminder to all that cryptocurr­encies are not safe assets, hence their use on the African continent is not without dangers for several reasons.

The joint committee also reminded the sub-region that cryptocurr­encies can be refused for payment without contraveni­ng legal provisions.

It added that cryptoasse­ts are not a means of payment and cannot be likened to e-cash, even as cryptocurr­encies were also identified as extremely volatile, owing to restrictiv­e issuance mechanism that encourages speculatio­n.

The joint committee stated that like all other digital payment instrument­s, Bitcoin is always attacked by pirates.

The committee urged cryptocurr­encies enthusiast­s to guard against the risk of theft, adding that if the cryptocurr­ency is by nature inviolable, portfolios, on the other hand, are not.

Among the risk factors identified is that cryptocurr­ency is an insecure liquidity, given the shallow depth of the foreign exchange market and high concentrat­ion of assets (96 per cent of bitcoins are believed to be held by 2.5 per cent of users), a liquidity problem may arise.

Another risk factor of cryptocurr­encies identified by the committee is that it is an irreversib­le transactio­n.

The transactio­n cannot be cancelled when the sender notices a mistake, as only the receiver can decide to return them.

The committee said another source of concern to its use was that almost no authority to regulate it.

The joint committee, however, said the boom of Bitcoin and the growing popularity of virtual currencies had caught the attention of financial authoritie­s, while government­s have started giving them a thought.

It noted that some countries have made efforts to put in place regulation­s and have made some progress.

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