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Sweden Central Bank Governor Issues Blunt Verdict on Bitcoin
Bitcoin: It’s Like Trading in Stamps
That’s the verdict handed down by Stefan Ingves, governor of Sweden central bank aka Sveriges Riksbank at a recent banking conference in Stockholm. “Private money usually collapses sooner or later,” he said. Ingves also expressed concern about money laundering issues that seem to go hand in hand with bitcoin and other digital currencies and the potential that efforts by central banks to establish regulatory oversight will not be successful. His comments may have been responsible for the September 10 broad dip in cryptocurrency values across the board.
Ingves Is Not Alone in His Views
Concerns about the collapse of crypto are not exclusive to the central bank governor in Sweden. Andrew Bailey, Ingves’ counterpart with the Bank of England has expressed equal skepticism. “Buy them only if you’re prepared to lose all your money,” he has said.
Ireland’s central bank governor Gabriel Makhlouf has likewise shared similar views. Makhlouf compared crypto to people putting money into tulips centuries ago because they believed it to be a good investment.
What About in the U.S.?
Even the United States Federal Reserve is wary of bitcoin and other cryptocurrencies. They may be assets, but when you throw the words “highly speculative” in front of the term, they tend to lose economic clout. “They’re really vehicles for speculation,” said Federal Reserve Chair Jerome Powell in an April 2021 interview with The Economic Club of New York. “No one is using them for payments, for example, like the dollar,” he said.
Then Why Are Central Banks Coming Out With Their Own Digital Currencies?
It’s a good question. Despite crypto’s negative reviews by many central banks, most recognize there are some very positive qualities. For example, digital currencies promote inclusion by allowing the unbanked greater participation in the economy.
Presently at least 80 countries are investigating establishing their own Central Bank Digital Currencies (CBDCs), basically digital forms of their countries’ fiat currencies. There are, however, several differences between cryptocurrencies and CBDCs.
For starters, bitcoin and other altcoins are decentralized currencies which run on their own public blockchains, while CBDCs are run on a centralized, permissioned blockchain network. Additionally, cryptocurrency users remain anonymous while the identities of CBDC users are known. And perhaps most importantly, the electronic coins behind CBDCs are completely government backed. As various countries move forward in their investigations, that last difference will provide an important guardrail for more cautious investors.