Bit­coin too small to threaten world econ­omy, says Bank of Eng­land deputy

The Guardian Australia - - Technology - An­gela Mon­aghan

Bit­coin is too small to pose a risk to the global econ­omy, ac­cord­ing to a se­nior Bank of Eng­land ex­ec­u­tive, as the cryp­tocur­rency passed the $10,000 bar­rier for the first time.

Bit­coin has risen ten­fold in value so far this year, the largest gain of all as­set classes, prompt­ing scep­tics to de­clare it a clas­sic spec­u­la­tive bub­ble. The dig­i­tal cur­rency topped $10,800 (£8,060) on Wednesday morn­ing.

The rapid growth in the value and pop­u­lar­ity of the vir­tual cur­rency, which emerged in the aftermath of the fi­nan­cial cri­sis and al­lows peo­ple to by­pass banks and tra­di­tional pay­ment meth­ods to pay for goods and ser­vices, has forced cen­tral banks, fi­nan­cial reg­u­la­tors and in­sti­tu­tions to con­sider how to re­spond.

Sir Jon Cun­liffe, the BoE deputy gover­nor, told BBC Ra­dio 5 Live: “This is not a cur­rency in the ac­cepted sense. There’s no cen­tral bank that stands be­hind it. For me it’s much more like a com­mod­ity.

“This is not at a size where it’s a macroe­co­nomic risk to the global econ­omy, but when prices are mov­ing like that, my view would be in­vestors need to do their home­work.”

Banks and other fi­nan­cial in­sti­tu­tions have been con­cerned about bit­coin’s early as­so­ci­a­tions with money laun­der­ing and on­line crime, and it has not been adopted by any gov­ern­ment.

The JP Mor­gan chief ex­ec­u­tive, Jamie Di­mon, has de­scribed bit­coin as “worse than tulips”, in ref­er­ence to a fa­mous mar­ket bub­ble from the 1600s. Speak­ing in Septem­ber, Di­mon said the dig­i­tal cur­rency was a fraud that would ul­ti­mately blow up, adding it was only fit for use by drug deal­ers, mur­der­ers and peo­ple liv­ing in places such as North Korea.

How­ever, ac­cord­ing to re­ports last week, JP Mor­gan is con­sid­er­ing

whether to help its own clients bet on the price of bit­coin through pro­posed fu­tures con­tracts to be of­fered by CME Group. The bank would col­lect fees for pro­vid­ing such a ser­vice.

Den­nis de Jong, the manag­ing direc­tor at the on­line cur­rency bro­ker UFX, said the value of the cryp­tocur­rency was likely to rise fur­ther.

“Un­til bit­coin be­comes a com­monly used pay­ment source, it’s very pos­si­ble that it could hit $15,000 and be­yond based on its cur­rent de­sir­abil­ity,” he said. “If bit­coin falls into wider cir­cu­la­tion, and be­comes ac­cepted into more con­ven­tional funds and ex­changes, we are likely to see a nor­mal­i­sa­tion of its value.”

• Fol­low Guardian Busi­ness on Twit­ter at @Busi­nessDesk, or sign up to the daily Busi­ness To­day email here.

Gold-plated sou­venir bit­coin coins. The cryp­tocur­rency’s value rose past $10,000 this week. Pho­to­graph: Justin Tal­lis/AFP/Getty Images

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.