Australia central bank gov says bitcoin fascination is 'speculative mania'


SYDNEY: The fascination with virtual currencies feels more like a "speculative mania", the head of Australia's central bank said on Wednesday, just days after the launch of the world's first bitcoin futures.

Bitcoin, the world's biggest and best-known cryptocurrency, surged past $17,000 on Tuesday to an all-time high, an almost 20-fold increase in its price this year.

Wild gyrations of 10-30 percent in a single day is quite common in bitcoin, which was last up 1.5 percent at $16,900. Investors have increasingly grown optimistic that the $20,000-mark is now within reach.

To tap in to the rapidly rising investor interest, Chicago-based derivatives exchange CBOE Global Markets began futures trading in bitcoins on Sunday, while the CME Group is expected to launch its contracts on Dec. 17 .

But Reserve Bank of Australia (RBA) governor Philip Lowe said it was hard to see bitcoins being used for everyday transactions.

"When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions," Lowe said in the speech titled "An eAUD?"

"The value of bitcoin is very volatile, the number of payments that can currently be handled is very low, there are governance problems, the transaction cost involved in making a payment with bitcoin is very high and the estimates of the electricity used in the process of mining the coins are staggering."

The comments come days after his New Zealand counterpart said bitcoin appeared to be a "classic case" of a bubble, and cast doubt on its future.

"Bitcoin is to me very much like gold," Grant Spencer, acting governor of the Reserve Bank of New Zealand, told a local television program. "It's mined, it has a fixed quantity and the price is very volatile."

"I think a cryptocurrency that has a more stable value will be the sort of cryptocurrency that is more useful for the future," Spencer said.

"I think they are part of the future. But not the sort that we see in bitcoin."

South Korea's government has called an emergency meeting to discuss the trading of cryptocurrencies, and measures on the market will be announced on Friday, a central bank official said on Wednesday.

South Korea is among the world's biggest bitcoin markets. On some days, daily bitcoin volume has surpassed that of the nation's small-cap Kosdaq share index, which has a market value of 271 trillion won ($248.6 billion), according to the government.

DIGITAL BANKNOTES

Lowe noted the form that money takes has come a long way from clam shells, stones and even rum to metal coins and paper banknotes, and expects this innovation to continue.

The RBA itself is open to the idea of issuing a new form of digital money, perhaps using distributed ledger technology on which bitcoins function.

But the case for doing that has not yet been established, Lowe said, adding the central bank has no immediate plans to issue an electronic form of Australian dollar banknotes, or eAUDs.

"The history of private issuance is one of periodic panic and instability," he added.

"In times of uncertainty and stress, people don't want to hold privately issued fiat money. This is one reason why today physical banknotes are backed by central banks."

The RBA is in close contact with its peers in other countries about introducing digital money.

While a privately issued eAUD is conceivable, history has shown there are "significant difficulties and dangers" associated with privately issued fiat money, Lowe said. - Reuters
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!
   

Next In Business News

Wall Street opens lower as rally in growth stocks falters
Axiata’s tower arm edotco weighing US$700mil financing, sources say
MYAirline to operate as LCC, not ULCC
MUI sells 5.57% stake in PMC for RM6.45mil
Wiki Impact report: Bursa top 20 companies donated RM159.69mil in cash in 2021
FMM: Implementation of CPTPP is timely for Malaysian businesses to recover
Ringgit strengthens against US dollar at the close
Ancom Nylex completes acquisition of 25% stake in Ancom-Chemquest Terminals
RHB Bank Cambodia aims to become SME bank of choice by 2024
Bursa Malaysia ends higher for third consecutive day on Wall St rally

Others Also Read