According to Mario Draghi, the ECB president is of the opinion that cryptocurrencies are not “mature” enough to be considered by the European Central Bank (ECB) for regulation.
Draghi said this while addressing question about the potential of cryptocurrencies like bitcoin at a press conference last weekend.
“With anything that’s new, people have great expectations and also great uncertainty. Right now we think that especially as far as bitcoins and cryptocurrencies are concerned, we don’t think the technology is mature for our consideration,” Draghi said.
Innovation should also be “critically assessed” for risks even though it should be “cherished for its potential benefits,” cautioned Draghi.
“One of the lessons of the great financial crisis is that financial innovation, in this case it’s financial and technology innovation… should be embraced with lots of attention to its potential risks,” Draghi told a room of reporters.
The ECB did not have the authority to regulate cryptocurrencies, he said last month in a statement to the European Parliament’s Committee on Economic and Monetary Affairs.
With many seeing sharp rises in price, interest in cryptocurrencies has exploded in recent months. And regulators across the world have differing views on the more than 1,000 virtual currencies that are now available in the market.
China has banned cryptocurrency exchanges even while Draghi appears to be taking a wait and see approach. A stop in initial coin offerings, a way for start-ups to raise money by issuing virtual tokens, have also been put on stop by South Korea.
Bitcoin is a commodity in the same vein as precious metals or fuels, Abu Dhabi has recently ruled. It is unregulated in the Middle East country. However, companies have been allowed to accept bitcoin as payments in Japan.
The IMF wants to be a part of how they develop in the future and cryptocurrencies could cause “massive disruptions”, said the IMF Managing Director Christine Lagarde.
Goldman Sachs also says that bitcoin is not the new gold.
Advising investors that precious metals “remain a relevant asset class” in portfolios, Goldman Sachs said in a note that cryptocurrencies like bitcoin are not the “new gold.”
Goldman detailed the benefits of holding gold in a portfolio in a note to clients earlier this week.
“The use of precious metals is not a historical accident – they are still the best long-term store of value out of the known elements,” the investment bank said.
But the issue of the rise of cryptocurrencies was also addressed by the investment bank. Because of the fact it has at times seen price rises due to geopolitical tensions and has a finite supply, therefore many commentators have dubbed bitcoin as digital gold”.
Bitcoin is not a good store of value versus gold, Goldman concluded.
“Gold wins out over cryptocurrencies in a majority of the key characteristics of money,” Goldman said.
virtual currencies also have “significant regulatory risks” and they are vulnerable to hacking, the analysts said about digital wallets, where people can store cryptocurrencies.
(Adapted from CNBC)