Adding to the list of skeptical central bankers around the world, Belgium National Bank governor Jan Smets remains unconvinced of bitcoin’s long-term prospects. Per Smets, a lack of financial stability limits bitcoin’s true purchasing power and will hinder its long-term growth.
Central Banks Following Bitcoin Closely
It has been a fantastic year for many digital assets. With an overall market cap of now over half a trillion dollars, more and more central bankers are letting the world know where they stand. This can give insight into how they will go about regulating digital assets.
When asked this week about bitcoin threatening central banks, Smets brushed it off. It was due to the fact BTC is relatively unstable and, as a result, can’t be trusted as a worldwide financial instrument.
“It’s not stable like the Euro… Creating blockchain based digital cash could diminish our limitation to interest rates below zero,” he said.
When prompted for more details, he further explained his skepticism on the bitcoin market, and whether bitcoin should be treated as a currency at all.
“Let’s stop calling bitcoin a currency. Unlike the euro, bitcoin is not guaranteed by a central bank or government as a means of payment so bitcoin is not a currency. Even if there are small risks for investing in bitcoin at the moment, there are potential consequences for financial stability”.
A Future for Digital Currency
Despite voicing concerns over the digital asset landscape and investing in bitcoin as a store of value, Smets stills sees value in digital currency. He highlighted situations where there would be a digital euro or digital currency corresponding to specific countries around the world.
Citing efficiency gains for new types of payment systems, he can see a future where bank users have access to digital wallets. But in this future, the purchasing power of each unit of currency would still be managed by central banks around the world — similar to the way it is now.
Although his criticisms are mostly based on the massive volatility that BTC has experienced in 2017, other central bankers around the world have for years made similar remarks on the digital currency revolution. And just as the central bankers have warned, in the end it’s up to individual investors or those partaking in digital payments to understand the risks and decide for themselves.
Do you believe central banks will eventually issue a blockchain based cryptocurrency? Why or why not?
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