Bundesbank board member Carl-Ludwig Thiele has ruled out the introduction of official digital money for the euro zone and warned of losses from investments in cryptocurrencies such as bitcoin, according to a German newspaper.
“Digital central bank money analogous to cash is currently not in sight,” Thiele told weekly Euro am Sonntag in an interview published on Saturday.
Digital currencies allow users to make online transactions across borders instantaneously and have surged in popularity this year because of their eye-watering price rises. Bitcoin, the best-known, has increased in price around twentyfold since the start of the year.
But the cryptocurrency plunged by 30 percent to below $12,000 on Friday as investors dumped it after its sharp rise to a peak close to $20,000 prompted warnings by experts of a bubble.
“We are seeing a rapid increase in value, which brings the risk of rapid losses,” Thiele said.
Decentralised digital currencies like bitcoin are still not widely accepted. Critics say they can easily be used for money laundering and the fact that they are unregulated makes them risky to use — hence the idea of an “e-” version of a physical currency that still has a central controlling authority.
The Bank for International Settlements (BIS) said in September it was too soon to determine whether central banks should issue their own cryptocurrencies, as the risks could not yet be fully assessed and the technology underpinning them was still unproven.
Christoph Schmidt, head of Germany’s panel of economic advisers – known as the wise men – warned that private investors’ losses from bitcoin investments could have a ripple effect on financial markets if they were financed with debt.
“If their losses affect others because they were financed with loans, then that would increase the risk of distortions on financial markets,” he told the German daily Rheinische Post.
Some high profile individuals such as Nobel Prize-winning economist Joseph Stiglitz have said the cryptocurrency should be outlawed.
Schmidt said he did not favour making crytocurrencies illegal but that potential investors must have detailed information on the risks of investments in bitcoin.
German financial watchdog BaFin president, Felix Hufeld, said that regulators must “stay on the ball” when it comes to cryptocurrencies but that they still had much to learn on the subject.
“We are all working on understanding the topic and building our know-how,” he told the German daily Bild.
Source: Reuters (Reporting by Maria Sheahan; Editing by Andrew Bolton)