Are central bankers about to burst the bitcoin bubble?

Foreign exchange traders have long been used to “jawboning” from central bankers – that is, using carefully selected words to suggest that they are unhappy with the level their currency is trading at, usually because they consider it over-valued.

But the world’s top central bankers have a new target: bitcoin and its fellow digital currencies. And some strongly-worded statements show the depth of their feeling on the subject.

A month ago, Reserve Bank governor Philip Lowe described the fascination with bitcoin and other cryptocurrencies as a “speculative mania”. Later that day, Janet Yellen, the head of the powerful US Federal Reserve described bitcoin as a “highly speculative asset”, noting that “it is not a stable source of value, and it doesn’t constitute legal tender”.

Two days later, Bank of Canada governor Stephen Poloz ramped up the attack, saying that buying bitcoin was “closer to gambling than investing”.

But it was Bank of England governor, Mark Carney, who really worried digital currency enthusiasts, when he suggested that global regulators were likely to take a closer look at digital currencies given their surging popularity.

In particular, Carney, who heads the G20’s Financial Stability Board, said that a tightening up of the rules around initial coin offerings – the process whereby companies raise millions by selling digital tokens that can be used as currency on blockchain platforms- was necessary.

Official hostility

Many of bitcoin’s aficionados saw this display of official hostility as extremely predictable.

After all, central banks presently enjoy a monopoly on issuing money.

So it’s only natural that they’d resent the rise of bitcoin and other cryptocurrencies that involve the creation of new and digital forms of payments, free of the shackles imposed by governments and central bankers.

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Source: Are central bankers about to burst the bitcoin bubble? | afr.com