Bank of Portugal Official Dismisses Bitcoin as Currency

A member of the board of directors at the Central Bank of Portugal has said that the institution is watching the cryptocurrency market, especially Bitcoin, with caution and concern. In an interview with Portuguese media outlet ECO, Hélder Rosalino said that “Bitcoin is not a coin” and “cryptocurrency is not a currency” in the view of the central bank.

“A currency, to be classified as such, needs to have two fundamental characteristics: the first is to associate itself with the idea of the store of value; then, on that currency, there must be a right to credit. When a central bank creates a currency, it creates a liability on its balance sheet that has to be paid. If, one day, everyone was to hand that currency over to their banks, then the central bank would have to pay, and the liability would be eliminated.”

While negative on cryptocurrency, the central bank official is confident about the functionality and potential of blockchain technology. The same position has already been adopted by most critics of Bitcoin and cryptocurrencies in general. For instance, Societe Generale head Frederic Oudea recently told CNBC that Bitcoin had no long-term future, but blockchain was a disruptive technology. Jamie Dimon of JP Morgan and Axel Weber of UBS have expressed similar views.

For Rosalino, cryptocurrencies are not registered and regulated by central banks, nor do they generate a credit claim. He added:

“[A cryptocurrency] is a convention, a computerized solution based on a very powerful technological base, a fantastic network, the blockchain, which allows payments without intermediation. It allows me, through a virtual currency, to make peer-to-peer transactions without brokerage outside the financial system. But it is not a coin, so we look at cryptocurrencies with concern and caution because, recognizing the disruptive innovation associated with them, there are several risks.”

On the matter of risks, he said that cryptocurrencies, especially Bitcoin, have a limited supply, which creates conditions for a spike in demand and, as a consequence, speculation. Surging demand also causes high volatility.

Rosalino added that the regulator was monitoring Bitcoin because of its use by fraudsters and money launderers.