The global banking system has been taken due note of cryptocurrencies in general and bitcoin specifically owing to increased awareness of these digital currencies. While there have been claims that cryptocurrencies are the future, there are no indications from either the global banking system or world governments that they are willing to do away with the fiat system.
Many governments and banks around the world have claimed that bitcoin and cryptocurrencies are a mere bubble and they will burst soon. Along these lines is a new statement from European Central Bank (ECB) vice president Vitor Constancio who said that that cryptocurrencies will never replace the fiat system. Cryptocurrencies including bitcoin are mere commodities used as a speculative asset said Constancio.
According to a report on Reuters, Constancio acknowledged that cryptocurrencies did have their use – albeit only to some extent – in ‘very special circumstances’ such as in countries that were in an economic crisis. However, he stressed that cryptocurrencies can never replace general money substitutes.
Bitcoin recently hit its all time high of $7,800, but subsequently fall below the $6000 mark in a matter of hours and then bounced back to $6,800 levels as of now. These price surges and declines are seen by many as the inherent problem with the cryptocurrencies and their unregulated nature.
Mario Draghi, the ECB president, in July said that digital currencies posed little threat to the economy. While they may not present a risk at present, Draghi added that there could be a ‘build-up of risks’ from cryptocurrencies in the future. At which point, a ‘direct regulatory response’ would be required. At present, though, the ECB president doesn’t believe that cryptocurrencies such as bitcoin are ‘mature‘ enough for regulation.
Interestingly, it was only in September that Draghi was telling the European Parliament’s Committee on Economic and Monetary Affairs that the ECB did not even have the authority to regulate cryptocurrencies. He said that it wasn’t within their powers to prohibit or do something about bitcoin.
However, while the ECB president doesn’t believe that digital currencies pose a threat to the financial economy, Constancio is warning central banks not to back them.