Central Bankers Say Bitcoin Is High Risk Investment, Poor Store of Value, Could Collapse
Two central bank governors have shared their opinions about bitcoin after the cryptocurrency became legal tender in El Salvador. The governor of the Bank of Mexico sees bitcoin as a high-risk investment and a poor store of value while the governor of Sweden’s central bank, the Riksbank, believes bitcoin could collapse.
Central Bankers Continue to Warn About Bitcoin
The governors of the Bank of Mexico (Banxico) and Sweden’s central bank, the Riksbank, have shared their views on bitcoin after the cryptocurrency became legal tender in El Salvador.
Bank of Mexico Governor Alejandro Diaz de Leon said Thursday that bitcoin is more like a means of barter than fiat money, Reuters reported, adding that he called the cryptocurrency “a high-risk investment and a poor store of value.” The Banxico governor is an economist; he was appointed by Mexico’s president to serve as governor of the central bank until Dec. 31. He was quoted as saying:
Whoever receives bitcoin in exchange for a good or service, we believe that is more akin to bartering because that person is exchanging a good for a good, but not really money for a good.
“In our times, money has evolved to be fiat money issued by central banks. Bitcoin is more like a dimension of precious metals than daily legal tender,” he continued.
His comments suggest that Mexico will not be adopting bitcoin as a national currency as El Salvador did anytime soon. The Salvadoran Bitcoin Law went into effect on Sept. 7 and BTC is now legal tender alongside the U.S. dollar.
The Bank of Mexico chief argued that in order for a cryptocurrency to be considered money it must be a reliable payment method. However, he said that cryptocurrencies are very volatile, noting that their values often swing wildly on a daily basis. The Banxico governor elaborated:
People will not want their purchasing power, their salary to go up or down 10% from one day to another. You don’t want that volatility for purchasing power. In that sense, it is not a good safeguard of value.
Meanwhile, the governor of the Swedish central bank, Stefan Ingves, compared buying and selling bitcoin to trading stamps. Bloomberg reported Thursday that he commented on bitcoin at a banking conference in Stockholm, warning that the cryptocurrency could collapse.
Ingves is also an economist. He previously served as Chairman of the Basel Committee and Director of the Monetary and Financial Systems Department at the International Monetary Fund (IMF). He was quoted as saying:
Private money usually collapses sooner or later. And sure, you can get rich by trading in bitcoin, but it’s comparable to trading in stamps.
The Riksbank governor previously said that bitcoin and other cryptocurrencies are unlikely to escape regulatory oversight as their popularity grows.
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