Stephen Poloz, the Governor of the Bank of Canada, is of the view that the rising popularity and prices of Bitcoin and its peers have “the ingredients of something that could be a significant disturbance” to the established financial system.
The governor delivered a speech in Toronto, followed by a press conference, and when touching upon the subject of cryptocurrencies, emphasized the risk involved, urging buyers to invest wisely.
“What their [cryptocurrencies] true value is may be anyone’s guess -- perhaps the most one can say is that buying these things means buying risk, which makes it closer to gambling than investing.”
“All I will say to people intending to buy a so-called cryptocurrency is that you should read the fine print and make sure you know what you are getting into,” Poloz added, stating he hopes the financial system will treat Bitcoin “cautiously”.
Poloz is not the first to express concern in regards to cryptocurrency investment. Many world governments and prominent finance industry figures have labelled Bitcoin “speculative”, called it a commodity instead of a currency, and expressed the fear that it is a bubble that is bound to burst, putting countless investors at risk of losing everything they put in.
Initial coin offerings – which allow startups to raise funds by selling digital tokens to investors – have been viewed with equal, if not more, suspicion, and have been banned in countries such as China and South Korea.
However, despite the criticism and detractors, the crypto market has grown tremendously – its market cap now exceeds $500 billion, and cryptocurrencies such as Bitcoin, Ethereum and Litecoin have all smashed through record highs. In addition, Bitcoin is slowing establishing its presence in the mainstream and among institutional investors, following the launch of Bitcoin futures by CBOE.
Commenting on the astronomical ascent of Bitcoin, which went from approximately $10,000 to $18,000 within the space of a little over a week, Poloz claimed the digital currency’s price chart “looks like the left-hand side of the Eiffel Tower”. He added that the hype surrounding it is “quite extraordinary”, and compared it to the bubble in tech stocks nearly 20 years ago.
While most governments have distanced themselves from privately-held cryptocurrencies, many are considering the possibility of their own central bank-issued digital currencies, among them Russia and Singapore.
Poloz admitted that the demand for digital currencies was likely to grow in the future, and stated that policy makers and bank officials are considering the possibility of a central bank-issued virtual currency:
“Bank staff are exploring the circumstances under which it might be appropriate for the central bank to issue its own digital currency for retail transactions.”