On September 12, Governor of Bank of England, Andrew Bailey, stated that it is difficult to see that Bitcoin cryptocurrency has intrinsic value and therefore cautioned over its use for payment purposes.
During a Question and Answer session with members of the public, Bailey stated: “I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value.”
He further said: “It may have extrinsic value in the sense that people want it.”
According to the governor, the British economy is expected to recover more rapidly than what many economists had predicted. However, he mentioned that he feels very nervous and worried that people use Bitcoin to pay for services and products because its value is uncertain, hinting that investors should understand the notion that Bitcoin’s price is volatile.
In the last 24 hours, Bitcoin price is trading over 8,800 GBP at Gemini crypto exchange, up from around 5,200 GBP during the start of the year.
Bailey’s Skeptical Take
The BoE governor has been a long-time skeptic of Bitcoin. In March, he offered his opinion on cryptocurrencies to Members of the UK Parliament at a Treasury Select Committee hearing, repeating the same statement that ‘though Bitcoin has no intrinsic value, it may have extrinsic value.’ He said that anyone investing money into Bitcoin should be ready to lose their funds. He stated: “If you want to invest in Bitcoin, be prepared to lose all your money.”
In September, he addressed a virtual conference organized by Brookings Institute where he stated that cryptocurrencies “have no connection at all to money.” Bailey does not believe that cryptocurrencies could offer promising investment opportunities because their values are subject to wild fluctuations.
Bailey’s sentiments seem to correspond with those of billionaire Warren Buffet who also made a remark in an interview that Bitcoin has no value. Although Buffet rarely talks to the media regarding the matter, Bailey has been a critic frequently speaking to reporters about cryptocurrencies.
In a BBC interview, when the price of one Bitcoin hit a new all-time high of $20,000 during late 2017, Bailey called the leading cryptocurrency as an odd commodity and volatile, while mentioning the same warning: “If you want to invest in Bitcoin, be prepared to lose all your money.”
However, Bailey treats digital fiat currency differently, claiming that stablecoins could offer some important benefits such as minimizing frictions on payments and significantly increasing the speed and reducing the cost of payments. Stablecoins are cryptocurrencies whose value is pegged to stable and real assets such as fiat currencies or Gold. In September, he announced a possible future in which both CBDCs and stablecoins co-exist and complement each other from a user experience perspective.
In July, the BoE governor announced that The Bank of England is intending to issue a Central Bank Digital Currency (CBDC). He acknowledged that the Central Bank is considering the possibility of launching a digital currency. The Bank of England is one of the central banks across the world pursuing e-money and CBDC projects.