BIS chief warns that Bitcoin could crash

Bitcoin is inherently very risky, and only central banks should issue digital currencies. This view was expressed by BIS managing director Agustín Carstens, according to Bloomberg.

“Investors should recognise that Bitcoin is capable of crashing. The odds of this rising as the system approaches the maximum supply of 21 million coins. This makes it more vulnerable to most attacks,” the official explained.

According to Carstens, Bitcoin’s volatility not only ‘undermines’ its use as a means of payment, but also makes it a ‘poor store of value’.

The BIS head described Bitcoin as a ‘speculative asset’, not money. He pointed to the lack of intrinsic value backing and suggested treating Bitcoin users as an online-gaming community.

Private stablecoins, such as Diem (formerly Libra) from Facebook, also came in for criticism, which nonetheless ‘inspire more trust than Bitcoin’. Carstens argues that the issuing organisation is responsible for maintaining the backing, which raises questions about their regulation and oversight.

“Fiat money occupies a central place in the market economy, and only central banks should be responsible for this. If digital currencies are needed, they should be issued by regulators,” Carstens emphasised.

In July 2020, Carstens said that central banks would soon begin issuing their own digital currencies.

Previously, the BIS chief was famous for once describing Bitcoin as “a bubble, a pyramid, and an environmental catastrophe all in one.”

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