The head of the Bank of International Settlements (BIS) has warned that central banks must be prepared to act against cryptocurrencies, which he labeled “a bubble, a Ponzi scheme and an environmental disaster”.
Agustin Carstens, the general manager of the BIS, said bitcoin raises concerns about consumer and investor protection.
“Appropriate authorities have a duty to educate and protect investors and consumers, and need to be prepared to act,” Carstens said during a speech in Frankfurt.
Carstens said digital tokens “masquerading as currencies” must not subvert trust in central banks.
He described bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster”, with his last point in reference to the huge amount of energy it takes to create the cryptocurrency.
Bitcoin’s price has tanked in the past week, and on Sunday it dropped below $8,000 a coin for the first time since it surpassed that level in November 2017. The asset has been under pressure since the start of the year as the threat of regulatory crackdowns around the world weigh.
Despite the drop in price and the chorus of “cryptocurrency naysayers”, the bitcoin market is actually maturing, according to David Coker, the former vice president of global risk management at Deutsche Bank.
“In truth these events are nothing more than a further sign that the bitcoin market, and cryptocurrencies in general, are maturing; in other words, business as usual and much ado about nothing.”
He explained that the decisions by Lloyds Bank and Virgin Money yesterday to ban credit card purchases of bitcoin and other cryptocurrencies were taken with the view that bitcoin represents a new asset class, exhibiting characteristics of both commodities and currencies.
“Viewed from this perspective, prohibiting credit card customers from charging their purchases of bitcoin makes good sense and is a sign that the market is adapting to the peculiarities of cryptocurrencies, without the need for top down regulation,” said Coker, who now works as a lecturer at the University of Westminster.
Bitcoin continues to yo-yo after a particularly rough month for the notoriously volatile cryptocurrency,
The price dipped back below $8,000 on Sunday morning after briefly surpassing $9,000 earlier on Saturday, the latter being a week high.
Bitcoin has lost more than half its value since hitting an all-time high of more than $19,000 at the end of last year.
The cryptocurrency has landed in the sights of regulators in recent weeks, dampening some of the appetite among investors.
Last week Lloyds became the first major bank in the UK to ban the buying of bitcoin with its credit cards. And Irish banks are the latest to be revealed to be monitoring the situation, following on from others in the UK.
An official from the ECB called it a gold rush with no gold, while finance heads in France and Germany called for a crackdown.