One of the eurozone’s most senior central bankers has waded into the debate over bitcoin, dismissing the cryptocurrency as “an instrument of speculation” and saying its sharp rise in value was akin to the 17th century tulip craze.
The views of Vítor Constâncio, the vice-president of the European Central Bank, echo those of JPMorgan Chase chief Jamie Dimon, who has described bitcoin as a “fraud”.
“Bitcoin is a sort of tulip,” Mr Constâncio said. Tulipmania, which erupted in the Netherlands in the 1600s, is often cited as one of the oldest examples of a financial bubble.
“It’s an instrument of speculation,” the ECB vice-president told the audience at a conference in Frankfurt on Friday. “But [it is] certainly not a currency and we don’t see it as a threat to central bank policy.”
Bitcoin’s value slumped last week after Mr Dimon said the cryptocurrency was “worse than tulip bulbs”. The phenomenon was a “fraud”, he added, saying it was only useful to drug dealers, murderers or the inhabitants of North Korea.
Bitcoin was trading at an all-time high of $4,911 at the beginning of this month, before falling to $3,899 after Mr Dimon’s comments. On Friday afternoon a bitcoin was worth $3,299.
Mr Dimon is known for expressing strong views but the outburst against bitcoin surprised some peers in the industry. Many banks are embracing both bitcoin and the blockchain technology that underpins it.
As issuers and guardians of official currencies, central bankers have faced questions about whether these private-sector rivals threaten their ability to control the supply of money.
Earlier on Friday ECB president Mario Draghi said in Dublin that the central bank did not think cryptocurrencies posed a threat to the euro or the bank’s monetary policy but said cyber risk posed one of the most important dangers for the stability of the financial system.
Mr Draghi this month hit back at a paper by an Estonian government official that mooted the idea of the Baltic state — which sees itself as something of a digital pioneer — creating its own cryptocurrency. “No member state can introduce its own currency; the currency of the eurozone is the euro,” the ECB president said.
Speaking on the same panel as Mr Constâncio, Huw van Steenis, global head of strategy at Schroders, an asset manager, said: “As cryptocurrencies grow, we should expect more central bankers to look to outlaw or crimp their use.
“This will be most acute in markets which are worried about capital flight and organised crime. This won’t stop speculators and enthusiasts, but will limit their potential to create the powerful network effects which would make them a useful parallel currency,” Mr van Steenis said.
https://www.ft.com/content/18507a26-9fb4-11e7-8cd4-932067fbf946
Topic: [2017-09-22] Bitcoin is like Tulipmania, says ECB vice-president (Read 3636 times)
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