De Nederlandsche Bank (DNB), the central bank of the Netherlands, has issued warnings to banks and payment institutions to be wary of transactions in virtual currencies such as bitcoins and altcoins.
The Dutch bank has advised that the payment processing through these types of currencies expose them to integrity risks as they are unaware of the identity of the parties buying and selling virtual currencies.
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DNB has further qualified existing virtual currencies including bitcoins and other altcoins as products with an extremely high risk profile.
"If a bank or payment institution’s clients and contacts include businesses that use altcoins, it has an indirect relationship with buyers and sellers of virtual currencies through those businesses. And since indirect relationships can affect the bank or institution’s reputation, this constitutes a derived integrity risk," the bank explained.
DNB claimed that through the usage of altcoins as a means of payment, financial institutions may open window for money laundering activities with their involvement, although indirect, in virtual currency trading.
The central bank of the Netherlands has announced that it would conduct an investigation in 2014 to verify the capabilities of banks and payment institutions involved in new payment methods such as virtual currencies in addressing the associated integrity risks.
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