Deutsche Bundesbank: No Cause to Prohibit Bitcoin
The Deutsche Bundesbank, the Central Bank of Germany, warns customers of bitcoin. The price of bitcoin might have been rising fast over the course of May 2017, but according to Bundesbank Chair Carl Ludwig, there is an imminent danger of a downward correction. Since no Central Bank backs bitcoin, it cannot be secure money. For a prohibition however he sees currently no cause.
In a recent interview with German Weekend Newspaper “Welt am Sonntag” Bundesbank Chair Carl-Ludwig Thiele talked about bitcoin again.
The Central Bank of Germany warned the Germans; whoever invests money in virtual coins, might suffer from losses. Bitcoin, Thiele urged, is just an object of speculation. Sometimes – like in the last weeks – the price thrives heavily, but this can easily look otherwise. Just a glance at the volatile price charts demonstrates that bitcoin is “not an appropriate medium to store value”, Thiele noted.
This is not the first time, Thiele publicly spoke out against bitcoin. In early 2014, following the large late-2013 bubble, the Bundesbank Chair explained that due to its architecture that cryptocurrency and its high grade of volatility, the cryptocurrency is poised to be a highly speculative investment asset. In this early note, he coined the term of bitcoin as “a niche phenomenon” in terms of transactional volume.
In the interview with “Welt am Sonntag,” Thiele repeated this assessment. He stated that he sees no cause for the prohibition of Bitcoin. Users, however, need to comply with Anti-Money Laundering laws, while he sees no risk for the financial system as a whole, at least as long as bitcoin remains a niche phenomenon. While every day just around 350,000 bitcoin transactions are processed, in Germany alone 77 million transactions, charges and credit card payments are made, Thiele told the newspaper.
Further, the Bundesbank Chair explained, why he does not trust cryptocurrencies like bitcoin. Bitcoin is a means of exchange, but since it is not issued by a central bank, but by anonymous entities, Thiele refuses to accept it as a currency. Citizens who store their wealth in bitcoin are warned. “We don’t decide for citizens what they do with their money,” Thiele said, “but we can warn them.” Whoever invests into bitcoin does so at their own risk.
After all, Thiele did not add something remarkable new compared to his first statement in 2014. Nobody expected that the Bundesbank would like bitcoin, but after all the attitude seems to be fair and neutral from the perspective of the institution. However, Thiele is much more enthusiastic when it comes to the technology of Bitcoin, the blockchain. After the Bundesbank launched a prototype for a blockchain based transfer of assets and shares, which has been the first release of an ongoing cooperation of Bundesbank with Deutsche Börse, Germany’s biggest securities exchange platform. The prototype, however, is still far from being ready to be released in the markets. When it was announced in late 2016, it was branded as more of a proof of concept.