European financial regulators have sounded the alarm over the risks consumers run by using virtual currencies such as Bitcoin, which has fluctuated between $340 and $1,240 in the past month.

The European Banking Authority will today issue a statement warning of the risk of violent fluctuations in electronic currencies’ value, the danger of “digital wallets” being hacked, and of the lack of legal protections for users. The move comes as authorities worldwide try to get to grips with the rapid expansion of unregulated cyber currencies.

The People’s Bank of China this month ruled that Chinese banks should not process or insure Bitcoin transactions, in a step towards regulatory oversight of a currency that has exploded in popularity – and in value – in recent months.