Bitcoin is "a form of speculation", says Vítor Constâncio, the vice-president of the European Central Bank who considers the virtual currency not to be a currency at all, despite each Bitcoin being worth, at the end of last week, $3,600
Vítor Constâncio headed the Bank of Portugal for ten long years between 2000 and 2010 and was shuffled off to the ECB where his utterances, mercifully, have been few.
However, he has decided to give us the benefit of his wisdom built up over the year when he oversaw the rushed taxpayer-funded bailout of BPN in 2008 after a €700 million loss was posted due to "offshore, off-balance-sheet operations." This Constâncio inspired bailout has cost the Portuguese taxpayer €3.66 billion, and rising.
When BPN collapsed there was heated argument in Portugal's parliament as MPs said Constâncio had had the means to prevent the BPN collapse and that he did nothing.
After this disastrous performance as head of Portugal's central bank, in December 2010, Constâncio was appointed vice president of the European Central Bank, for an eight-year mandate, being responsible for 'banking supervision', a topic of which he had proven to have little grasp.
Vítor Constâncio also declined to collaborate with the commission of inquiry into the Banif collapse, when asked, despite knowing vital information about Banif prior to its expensive implosion and sale two years ago.
Constâncio now offers the public his professional advice by comparing the bitcoin digital currency to a tulip, a description first suggested by James Dimon.
"Bitcoin is like tulip fever. It is an instrument of speculation for those who want to bet on something that can rise or fall 40% or 50% in a few days," said the failed banking supervisor, referring to the astronomical values that tulip bulbs achieved on the Dutch market in the C17th.
Jamie Dimon, the president and chief executive officer of JPMorgan Chase, said recently that Bitcoin "is a fraud," and thinks the currency "worse than the tulip bulbs."
Also Mario Draghi, the ECB president, has decided to halt a proposal from Estonia to launch a digital currency, arguing that "the only valid currency in the euro zone is the euro."
The bitcoin digital currency has registered a strong appreciation since the beginning of the year. It finished the last week at $3,600 dollars, having varied between $752 and $4,921, its highest value ever and one clearly that has rattled bankers and regulators.
Jamie Dimon's problem isn't the technology behind bitcoin (called a blockchain,) it is with the currency as the larger bitcoin grows, the more of threat it becomes to governments who may then act to render the currency worthless.
A good reason for governments to suppress these crypto-currencies is that they make it easier for people to evade taxes and regulation. Many of the advantages of bitcoin are disadvantages to governments and central banks who want to control users.
The most financially restrictive governments have not taken effective action against cryptocurrencies as any effort to suppress, makes crypto-currencies more valuable.
The recent ban of botcoin in China might be viewed as supportive of Dimon’s view but in April 2017, Japan enacted declared bitcoin as legal tender and brought all digital currency exchanges under the supervision of Japan's Financial Services Agency.
South Korea has officially legalised international bitcoin transfers and is currently working on a regulatory framework for this new asset class.
Back at the ECB, Vítor Constâncio is railing against the success and high valuation of bitcoin as he is a banker/regulator of the old school – well paid, incompetent and under threat. Luckily, he leaves office next April.
Wall Street Journal writer James Mackintosh says:
"Gold has a value far above what is justified by its uses in electronics and jewelry only because (almost) everyone agrees that it has value. That “network effect” is what bitcoin needs to establish itself, and the more attention it garners, the more likely it is to become established. Yet gold has had thousands of years and a history of being used to back money to support its position.
"If we assume that bitcoin will either succeed completely in displacing gold or fail and be worth zero, it helps explain why the digital token has been so incredibly volatile, with a 40% loss in two weeks, and a 33% rebound since Friday’s low. Based on the simple choice between total success and failure, we can very roughly say that bitcoin at 70% of the gold ETF-derived price suggests a 70% chance of displacing so-called paper gold as society’s chosen emergency store of value, and a 6% chance of displacing physical gold.
"Even digital dreamers should accept that is far too high."
See also, Mishtalk: 'Bitcoin vs Dollars: Which One is a Fraud? Which One is a Ponzi Scheme?'
Comments
What is? I find this comment incomprehensible.
Speculation it might be. But its doing a dam sight bettor
than your banks,,