A top international banking official says that central banks should be prepared to intervene and prevent virtual currencies becoming a threat to financial stability.
Agustin Carstens, the general manager of the Bank for International Settlements (BIS) — an international organisation for central banks — said Tuesday (6 February) that bitcoin “has become a combination of a bubble, a Ponzi scheme and an environmental disaster.”
In a speech in Frankfurt, Germany, Carstens said many people believe so far that, given the limited size of virtual currencies, “concerns about them do not rise to a systemic level”.
But he added that “if authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability.” He said central banks must be prepared to intervene if necessary.
“There is a strong case for policy intervention,” he said while speaking at Frankfurt’s Goethe University, in comments reported by Reuters.
“These assets can raise concerns related to consumer and investor protection,” he continued. “Appropriate authorities have a duty to educate and protect investors and consumers, and need to be prepared to act.”
Carstens said that in order to stop virtual money from becoming a “parasite” on the traditional banking system more regulation and standards need to be put in place. “This means same risk, same regulation, and no exceptions allowed,” the top banker stated.
His comments came after UK prime minister Theresa May indicated that British authorities are “very seriously” looking into the ramifications of cryptocurrencies like bitcoin. Similar threats of a crackdown recently emerged from officials in South Korea and the US.
Cryptocurrency, at least in the form it was originally intended, does not require central banks to operate effectively. It is a decentralised form of money made and traded online. Its value spiked over the past six months, amid rising fears from bankers it was a bubble.
In December 2017, the price of a single bitcoin spiked to more than $19,000. It has since dipped significantly. On Tuesday, it fell to under $6,000 for the first time this year.
Earlier, The Telegraph revealed that Lloyds Banking Group was restricting its customers’ access to bitcoin, banning them from using its credit cards to purchase the cryptocurrency.