Bitcoin “In No Way a Currency,” According to Bank of France
The Governor of the Bank of France spoke about bitcoin at a recent conference in Beijing. The governer is yet another administrative skeptic to speak out aginst the disruptive capacities of the new asset class.
Bitcoin’s Volatility and User Compliance
The warning from Francois Villeroy rang loud and clear in the last few days to those interested in investing in bitcoin, as it has seen some marked surges and then fell as of late. The governor iterated that, “[It] is in no way a currency or even a cryptocurrency.”
Expressing that it is a speculative asset, he went on to remind those present that it does not have any economic basis, and its extreme instability and theoretical value are entirely self-contained.
Villeroy made it clear that the Bank of France does not support bitcoin investments due to the extreme risks involved. Those who choose to invest therein “do so entirely at their own risk,” he cautioned.
A Choir of Complaints
Villeroy is not alone in this view, or the first to make such a statement. Economist Jeffrey Dorfman raised the same point on the 17th of May 2017, in a Forbes article entitled Bitcoin Is An Asset, Not A Currency. At the time, the price of bitcoin had just topped $1,800.
“Is Bitcoin the currency of the future?” Dorfman writes. “No. There are two big problems with bitcoin as a currency: its value is unstable, and its transaction processing is too slow.”
Steve Forbes almost preluded Dorfman’s viewpoint in an article about money written in 2015. “Investors and entrepreneurs yearn for sound money,” he writes, “Just as marketplaces function best when weights and measures are reliable and fixed.”
When bitcoin is compared to the very definition of currency, digital or otherwise, it falls short of the most fundamental requirements.
Mohamed El-Erian echoed these statements at 2017’s annual Barclays Asia Forum. According to the Chief Economic Advisor of Allianz, a currency needs to be a stable medium of exchange as well as a “predictable store of value.”
He continued by saying that as bitcoin hadn’t (and still hasn’t) reached that point; it is “more of a commodity than a currency.”
El-Erian’s skepticism of bitcoin is common knowledge. In October 2017, he felt that bitcoin’s value was double what it should be. At the time of his statement, one bitcoin was valued at $4,000.
Further to that, El-Erian expressed the possibility that bitcoin may never be adopted by central banks and other prominent financial institutions, whereas many investors assumed that would inevitably be the case shortly.
Comparisons are Odious
Regardless of the angle at which you examine it, bitcoin consistently fails to meet the classification of currency. Although many individuals and private companies use it the world over, the general stance of banks and the vast majority of public companies is to steer clear of it.
Armed with the above knowledge, it is at the sole discretion of investors whether they wish to invest their funds with bitcoin or not. For some, the possibility of a significant return in a relatively short period is too great a temptation to pass up, despite the risks that global financial institutions collectively warn of.