# Last edited on 2014-02-20 17:53:55 by stolfilocal The document below is a recent advisory note by the Central Bank of Brazil about crypto-currencies. Executive summary: crypto currencies should not be confused with electronic means for payments in BRL. They have no emitting entity, backing institution or assets, no guarantees of acceptance or conversion to national currencies. Their price may fluctuate wildly, even to zero, and governments may prevent their use. They may get you involved in criminal investigations even if you use them in good faith. They may be stolen by hackers. We do not see them yet as a risk to the National Financial System, but we are following discussions in international forums and we may act if and when it is necessary. [hr] [Approximate translation by Jorge Stolfi, provided for reader's convenience only. The translation is not guaranteed to be accurate, especially with respect to the precise legal meaning of terms. This text should not be relied upon for legal purposes.] [b]BC informs about the risks associated with purchase of so-called "virtual currencies" or "cryptographic currencies"[/b] February 19, 2014 17:01 The Central Bank of Brazil informs, first of all, that the so-called virtual currencies should not be confused with the "electronic currency" that are the subject of Law 12.865, of October 8, 2013, and their infra-legal regulations. Electronic currencies, as disciplined by those norms, are assets stored in an electronic device or system that enable the end user to execute a payment trasaction valued in national currency [the Real, BRL --JS]. On the other hand, the so-called virtual currencies have their own form of denomination, that is, are expressed in accouting units that are distinct from the currencies emitted by sovereign governments, and cannot be considered electronic devices or systems for the storage of Reals. ​The use of so-called virtual currencies and the application, to them, of regulations that apply to the financial system and to payment systems, have been topics of international debate and statements by monetary authorities and other public authorities, with few conclusions to this moment. The so-called virtual currencies are neither emittled nor guaranteed by any monetary authority. Some are emitted and intermediated by non-financial entities, while others do not even have an entity that is responsible for their emission. In both cases, the entities and persons who emit or act as intermediaries of those virtual assets are neither regulated nor supervised by monetary authorities of any country. Those so-called virtual currencies have no guarantee of conversion to the official currency, and furthermore are not guaranteed by real assets of any kind. The conversion value of an asset known as virtual currency to currencies emitted by monetary authorities depends on the credibility and trust that the market agents may have in the acceptance of the so-called virtual currency as exchange instrument, and of the expectations of its appreciation. There is, therefore, no governmental mechanism that would guarantee the official currency value of the instruments known as virtual currencies, leaving the risk of their acceptance wholly in the hands of users. Because of their low transaction volume, of their low acceptance as exchange medium, and of the lack of clear perception about their legitimacy, the price variation of the so-called virtual currencies may be very large and fast, and may even lead to complete loss of their value. On top of that, the eventual application, by monetary authorities of any country, of precautionary, coercive or punitive measures relative to the use of those assets, may significantly affect the price of said currencies, or even the possibility of their negotiation. Furthermore, those virtual intruments may be used for illicit activities, which may lead to investigations by public authorities. That way, the user of those virtual assets, even if he trades them in good faith, may find himself involved in said investigations. Finally, the storage of the so-called virtual currencies in the so-called electronic wallets suffers from the risk that the owner of those assets suffers patriminial losses as a consequence of criminal attacks in the realm of the worldwide computer network. In Brazil, even though the use of the so-called virtual currencies has yet to become a risk to the National Financial System, especially to retail payment transactions (article 6, paragraph 4 of Law 12.685/2013), the Central Bank of Brazil is following the evolution of the use of said instruments and the discussions in international forums on the topic -- especially about their nature, adequacy, and mechanism -- with the aim of eventually adopting measures within the scope of its legal mandate, if necessary. Brasília, February 19, 2014 Central Bank of Brazil Press Office imprensa@bcb.gov.br [hr]