By John Ikani
The Parliament of the Economic Community of West African States (ECOWAS Parliament) has expressed concerns over the use of cryptocurrencies in the sub-region with regards to the risk factors involved.
Rising from a meeting of its joint committee in Ouagadougou, Burkina Faso yesterday, the ECOWAS Parliament noted that the sharp decline in the value of Bitcoin over recent weeks is a reminder for all that cryptocurrencies are not safe assets hence their use on the African continent is not without dangers for several reasons.
The parliament which identified Cryptocurrencies as extremely volatile, owing to restrictive issuance mechanism that encourage speculation, noted that Cryptocurrencies can be refused for payment without contravening legal provisions.
It also added that Crypto-assets are not a means of payment and cannot be likened to e-cash.
The joint committee further highlighted the security risks involved, like all other digital payment instruments, Bitcoin is always attacked by pirates and therefore cryptocurrencies enthusiasts need to guard against the risk of theft because if the cryptocurrency is by nature inviolable, portfolios, on the other hand, are not.
Among the risk factors identified is the fact that cryptocurrency is an insecure liquidity; given the shallow depth of the foreign exchange market and high concentration of assets (96% of bitcoins are believed to be held by 2.5% of users), a liquidity problem may arise.
Another risk factor of cryptocurrencies identified was its irreversible transactions.
The committee said another source of concern to its use was that almost no authority to regulate it.
It 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.
The committee noted that some countries have made efforts to put in place regulations and have made some progress.