Bitcoin more like gambling than investing: BoC governor
TORONTO — Bank of Canada governor Stephen Poloz is sounding the alarm on Bitcoin, calling the purchase of the cryptocurrency “closer to gambling than investing.”
In a speech at the Canadian Club Toronto on Thursday, the governor said Bitcoin is not a reliable store of value and does not constitute “money.”
He added that buying the cryptocurrency “means buying risk” and urged those flocking to it to “read the fine print.”
“It is a situation which has the ingredients of something that could be a significant disturbance,” Poloz said to reporters after his speech when asked about Bitcoin’s wider ramifications. “I’m hopeful that the system will treat it cautiously from here.”
Poloz’s comments come one day after the chair of the U.S. Federal Reserve Board Janet Yellen called Bitcoin a “highly speculative asset” that “doesn’t constitute legal tender.”
But on Sunday, Cboe Global Markets launched Bitcoin futures and CME Group Inc. says it plans to follow suit on Dec. 17, giving investors more ways to tap the cryptocurrency.
The price of Bitcoin has soared this year, briefly touching US$19,000 earlier this month before slipping to roughly US$16,700 on Thursday late afternoon. At the beginning of the year, one bitcoin was worth roughly US$996.
Poloz said Thursday the Bitcoin price chart “looks like the left-hand side of an Eiffel tower. You don’t see that very often.”
He likened it to the tech boom and bust, roughly two decades ago.
“The good news is it did not have widespread effects,” Poloz said. “It was fairly restricted to stocks in that sector, and if you got in late you lost some money, but you knew it was high risk when you got into it.”
The theme of Poloz’s speech Thursday focused on three “slower-moving, nagging issues” that keep him awake at night, describing them as concerns that are a little different than the more-pressing, immediate issues. His list included high house prices and household debt, cyber threats, and the difficult job market for young people.
He also spoke about the Canadian economy overall, saying it is running at close to full tilt at a part of the economic cycle that he thinks of as “the sweet spot.”
Poloz said that while a mechanical approach to setting interest rates would suggest that higher borrowing rates should already be in place, the central bank has been focused on scrutinizing some “unusual factors” at play.
That includes encouraging signs that companies are starting to expand their capacity by investing in equipment and by hiring more people, growing wages and a sudden jump in participation by young people.