European finance officials are underlining their skepticism toward virtual currencies like bitcoin, saying they are risky for investors and inefficient as a way to pay for things.
A top monetary official, Jens Weidmann, said in a speech Wednesday that virtual currencies such as bitcoin are not good means of payment because their values fluctuate so rapidly. He added they were no substitute for conventional currencies backed by central banks such as the European Central Bank.
Weidmann is head of Germany’s national central bank and also sits on the governing council of the European Central Bank, issuer of the shared euro currency.
He said that “for a stable monetary and financial system we need no crypto-tokens, but rather central banks obligated to price stability and effective banking regulation, and we have both in the eurozone.”
He said that central banks did not need to issue such currencies themselves, which he said could heighten the risk of bank runs.
Weidmann’s remarks follow a series of statements from top European officials warning banks and consumers about virtual currencies. The three European supervisory authorities for banking, securities, insurance and pensions have warned consumers of the risks of buying such currencies, saying they are “highly risky and unregulated products and unsuitable as investment, savings or retirement products.”
Last week, top European Central Bank official Yves Mersch said that central banks are concerned about the social and psychological effects the currencies seem to have. “There’s so much money flowing in that it’s like a gold rush — but there’s no gold,” he said in an interview with the Bloomberg news service. Mersch is a member of the bank’s six-person executive board that runs the institution day to day at its headquarters in Frankfurt, Germany.
Mersch and Weidmann said that the Group of 20 countries is looking into how to ensure that virtual currencies do not disrupt financial stability. They said a global forum such as the G-20 is a good place for the discussion since some of the virtual currencies have no national base. The G-20 is made up of 19 countries with 85 percent of annual global economic output plus the European Union. The group presidency is held this year by Argentina, which will host a meeting of finance ministers and central bank governors March 19-20 in Buenos Aires.
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