Bitcoin poses too many risks for banks to consider adopting it, the European Banking Authority (EBA) has warned.
The EBA found "more than 70 risks" associated with the cryptocurrency and warned that banks should not buy, hold or sell virtual currencies until a substantial amount of regulation is passed.
But the EBA suggested such regulation would need to be very wide-ranging, covering several markets, the segregation of client accounts, capital requirements and measures to guarantee the integrity of Bitcoin - including both its protocol and blockchain, the public virtual ledger on which all transactions are recorded.
The EBA said: "Considering that no such regime is in place as of now, some of the more pressing risks will need to be mitigated in other ways. As an immediate response, the EBA therefore advises national supervisory authorities to discourage credit institutions, payment institutions and e-money institutions from buying, holding, or selling virtual currencies."
It also expressed fears over consumer protection, in light of the collapse of the world's largest Bitcoin exchange, Mt. Gox, which lost 650,000 bitcoins in February.
However, it pointed out the potential benefits of virtual currencies, including faster and cheaper transactions.
But the organisation concluded: "However risks outweigh the benefits, which in the European Union remain less pronounced."
It said its approach would see virtual currencies develop outside the financial services sector.
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