Bank of England governor warns El Salvador over bitcoin volatility

Salvadoran citizens may be harmed by bitcoin volatility due to the authorities’ decision to legalise digital gold. Bank of England Governor Andrew Bailey expressed this view, according to Bloomberg.

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During a meeting with Cambridge University’s Students’ Union, he expressed concern about the Latin American country’s adoption of bitcoin as an official currency.

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“What worries me most is whether Salvadoran citizens understand the nature and volatility of the currency they own,” Bailey stressed.

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He added that IMF, which monitors risks to global financial markets, is unhappy with El Salvador’s decision.

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The Bank of England is examining the possibility of creating its own digital currency to ensure smooth online payments and provide consumers with a safe way to store money that keeps pace with technology.

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“There are compelling arguments in favour of digital currencies, but in our view they must be stable, especially if used for payments. For crypto-assets, that is not the case,” said the head of the central bank.

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The law recognizing bitcoin as El Salvador’s official monetary unit came into force on 7 September 2021. That day the price of the cryptocurrency fell below $47,000, after which quotes dropped to $43,000.

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During the ensuing rally, digital gold hit an all-time high above $69,000. This occurred on November 10, and just six days later the price fell below $59,000. On November 26, quotes breached the $55,000 level.

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Earlier, Bailey said that bitcoin “is not suitable for the world of payments” and “has no intrinsic value”.

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