Although the price of the world’s largest cryptocurrency continues to grow amid escalating popularity, a number of major central banks have been raising doubts about the long-term utility of bitcoin and its inherent volatility.
During a recent Stockholm banking conference, Sweden’s central bank Governor Stefan Ingves warned that bitcoin’s value could dramatically plummet, and compared the cryptocurrency to stamp collecting— in that it lacks validity and long-run feasibility. “Private money usually collapses sooner or later,” he explained, adding that “sure, you can get rich by trading in bitcoin, but it’s comparable to trading in stamps.” Ingves also highlighted that as the popularity of the virtual currency increases, the subsequent regulatory crackdown will also gain traction.
Similarly, Alejandro Díaz de León, the Governor of the Bank of Mexico, likened bitcoin to a barter tool rather than a robust legal tender, referring to the cryptocurrency’s volatile price fluctuations. “Whoever receives bitcoin in exchange for a good or service, we believe that is more akin to bartering because that person is exchanging a good for a good, but not really money for a good,” he said on Thursday, as quoted by Reuters. “People will not want their purchasing power, their salary to go up or down 10% from one day to another. You don’t want that volatility for purchasing power. In that sense, it is not a good safeguard of value.”
Meanwhile, Bank of England fintech director Tom Mutton downplayed bitcoin’s technology, instead suggesting that central bank digital currency transactions will likely be significantly more efficient. “Given its performance shortcomings and energy inefficiency, [it] is in no way a relevant comparison for the sort of technology we might use in a central bank digital currency.”
El Salvador, on the other hand, appears to have a significantly opposing viewpoint on bitcoin. Back in June, El Salvador’s government passed a new law to grant bitcoin legal tender status alongside the US dollar. As of September 7, all businesses across the South American country will be required to accept bitcoin transactions, and El Salvadorians will be able to use the cryptocurrency to make their tax payments.
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.