Invest
Bitcoin hits the trifecta, is labelled a bubble, Ponzi scheme and environmental disaster
Invest
Bitcoin hits the trifecta, is labelled a bubble, Ponzi scheme and environmental disaster
Central banks need to prepare for action in the face of the “combination of a bubble, a Ponzi scheme and an environmental disaster” that is bitcoin.
Bitcoin hits the trifecta, is labelled a bubble, Ponzi scheme and environmental disaster
Central banks need to prepare for action in the face of the “combination of a bubble, a Ponzi scheme and an environmental disaster” that is bitcoin.

That’s the indictment given by the Bank for International Settlements (BIS) general manager, Agustín Carstens. Speaking at the Goethe University House of Finance in Frankfurt, he added that bitcoin’s volatility means it’s a “poor means of payment and a crazy way to store value”.
In a lecture made this week, he said: “To the extent they are used, bitcoins and their cousins seem more attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions.
“In a way, this should not be surprising, since individuals who massively evade taxes or launder money are the ones who are willing to live with cryptocurrencies’ extreme price volatility.”
Echoing the Reserve Bank of Australia’s governor Philip Lowe, he said the current “fascination” with the cryptocurrency reflects a “speculative mania” more than any interest in its uses as a means of exchange.

Mr Carstens’ criticisms are nothing particularly new in the sector, although it is one of the stronger slams. In the last few months, Australian researchers have argued that between 43 and 49 per cent of all bitcoin transactions can be linked to the buying and selling of illegal goods, while others have warned of the amount of energy bitcoin mining consumes.
Multiple analysts, economist and researchers have called bitcoin a bubble.
However, Mr Carstens’ criticisms have added weight as BIS’ capital is held by central banks only.
Noting that authorities are already moving towards cracking down on cryptocurrencies, he said: “There is a strong case for policy intervention.
“As now noted by many securities markets and regulatory and supervisory agencies, these assets can raise concerns related to consumer and investor protection. Appropriate authorities have a duty to educate and protect investors and consumers, and need to be prepared to act.”
He said central banks have a duty to safeguard money’s real value and as such need to protect payment systems.
Bitcoin is not yet autonomous as a means of payment, he continued, highlighting that it “relies on the oxygen” that trading apps which link users to conventional bank accounts provide.
“If the only “business case” is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.”
Mr Carstens said that while cryptocurrencies “may pretend to be currencies”, they don’t align with basic definitions – a sentiment expressed by the deputy governor of the Swedish Central Bank, Cecilia Skingsley at the World Economic Forum’s Davos meeting in January.
Blasting them as also defying “lessons from theory and experiences” and unlikely to be trusted as sustainable forms of money, he said central banks need to be ready to step in if necessary.
“Cryptocurrencies piggyback on the 10/10 institutional infrastructure that serves the wider financial system, gaining a semblance of legitimacy from their links to it. This clearly falls under central banks’ area of responsibility.
“The buck stops here. But the buck also starts here. Credible money will continue to arise from central bank decisions, taken in the light of day and in the public interest,” he concluded.
Investors should embrace regulation
According to Melbourne law firm KHQ Lawyers' Darren Sommers, impending regulation should be welcomed by cryptoinvestors.
Speaking today, he said that a lack of regulation had enticed the more gung-ho investors to put money into crypto, in spite of the risk involved and that regulation would work to reduce risk with diminishing potential returns.
He said: "Cryptocurrency has become something akin to new Wild West of investment markets – it’s practically lawless and everyone is risking it all trying to cash in.
“It’s scary how many people I’ve heard of who see a lack of regulation as an incentive, whereas it should be the opposite. The massive ups and downs bitcoin has experienced recently is surely enough to warrant legal certainty.
“Make no mistake, regulation is coming and the authorities won’t hesitate in making an example out of someone when that time comes."
Investors should prepare for upcoming regulation by doing their homework and working out how and what they are willing to invest in, he said.
Apollo Capital's chief investment officer, Henrik Andersson repeated the sentiments, saying that his firm welcomed regulation as it would make the cryptosphere more appetising to institutional investors.
“At the moment digital is the domain of risk takers and day traders. But institutional investors like super funds and trusts have a cascade effect so if they enter the digital market the benefit is shared and more people win,” Mr Andersson said.
“Certainly, that would indicate greater regulation is a good thing."

Bitcoin
Aussie bitcoin mining startup smashes pre-seed funding record
An Aussie bitcoin mining startup has raised $2.6 million in pre-seed funding, setting an Australian record. Read more

Bitcoin
Blockchain tipped to ‘irreversibly’ shake up global payments system
Bitcoin and other cryptocurrencies are reaching the point of critical mass, an expert has said. Read more

Bitcoin
Does bitcoin now fit the accounting definition of cash?
With bitcoin being declared legal tender in El Salvador and more generally gaining acceptance as a transaction currency across the world, does this cryptocurrency now meet the definition of cash, as ...Read more

Bitcoin
Bitcoin’s death cross descent may just be the beginning
Some bitcoin backers are jumping at the chance to gain from recent losses in the cryptocurrency market. Read more

Bitcoin
Goldman Sachs says bitcoin could hit US$100k despite recent losses
Inflation could drive the price of bitcoin to new heights. Read more

Bitcoin
Bitcoin records worst monthly performance since May
The world’s most popular cryptocurrency has ended a tumultuous 2021 on a sour note. Read more

Bitcoin
Panic-sellers offer bitcoin backers a Christmas bargain
Bitcoin’s latest losses could bolster the long-term gains of true crypto believers. Read more

Bitcoin
Aussies are already paying their bills in bitcoin
Getting paid and paying bills in bitcoin may just be a matter of time. Read more

Bitcoin
Aussie bitcoin mining startup smashes pre-seed funding record
An Aussie bitcoin mining startup has raised $2.6 million in pre-seed funding, setting an Australian record. Read more

Bitcoin
Blockchain tipped to ‘irreversibly’ shake up global payments system
Bitcoin and other cryptocurrencies are reaching the point of critical mass, an expert has said. Read more

Bitcoin
Does bitcoin now fit the accounting definition of cash?
With bitcoin being declared legal tender in El Salvador and more generally gaining acceptance as a transaction currency across the world, does this cryptocurrency now meet the definition of cash, as ...Read more

Bitcoin
Bitcoin’s death cross descent may just be the beginning
Some bitcoin backers are jumping at the chance to gain from recent losses in the cryptocurrency market. Read more

Bitcoin
Goldman Sachs says bitcoin could hit US$100k despite recent losses
Inflation could drive the price of bitcoin to new heights. Read more

Bitcoin
Bitcoin records worst monthly performance since May
The world’s most popular cryptocurrency has ended a tumultuous 2021 on a sour note. Read more

Bitcoin
Panic-sellers offer bitcoin backers a Christmas bargain
Bitcoin’s latest losses could bolster the long-term gains of true crypto believers. Read more

Bitcoin
Aussies are already paying their bills in bitcoin
Getting paid and paying bills in bitcoin may just be a matter of time. Read more