BIS head called the cryptocurrency a ‘Ponzi scheme’
The value of Bitcoin has plunged to $5,947.40 (£4,256.44) — its lowest price since November 2017— after a leading banker said the cryptocurrency posed a threat to financial stability.
The head of the Bank for International Settlements (BIS), Agustín Carstens, said bitcoin had become a combination of “a bubble, a Ponzi scheme and an environmental disaster” that threatened to undermine public trust in central banks.
“If authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” Carstens said today, adding: “There is a strong case for policy intervention. Appropriate authorities have a duty to educate and protect investors and consumers, and need to be prepared to act.”
Tightening legislation across countries has shaken the confidence of public in cryptocurrencies. Earlier last week, Facebook had banned advertisements for cryptocurrencies amid concerns that too many were being used to mislead potential customers.
Bank of England governor Mark Carney also said recently that the G20 needed to consider how easily digital coins should be converted into other central-bank issued currencies, as well as the role of anonymity, as ‘a lot of the underlying use of these currencies has been illicit activity’.
Established in 2009 after the financial meltdown, Bitcoin is a digital currency that has no central bank or regulatory authority backing it up. The digital coins are stored in a digital wallet or on the cloud and can be used in transactions.