Bitcoin Could Become Worthless, Bank Of England Declares
The Bank of England has said that bitcoin could be “worthless” and people investing in the digital currency should be prepared to lose everything, Richard Partington reported for The Guardian.
Photo Insert: This is not the first time a warning has been issued about the volatile value of bitcoin.
In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (£37,786) a piece.
The cryptocurrency peaked above $67,000 in early November but suffered a sell-off after news first broke of the Omicron variant of coronavirus, before stabilizing around its current level in the past week.
The deputy governor, Sir Jon Cunliffe, said the Bank had to be ready for risks linked to the rise of the crypto asset following rapid growth in its popularity. “Their price can vary quite considerably and [bitcoins] could theoretically or practically drop to zero,” he told the BBC.
The market capitalization of crypto assets has grown tenfold since early 2020 to about $2.6-trillion, representing about 1% of global financial assets. About 0.1% of UK households’ wealth is in bitcoin and similar crypto assets, such as ethereum and Binance coin. As many as 2.3 million people hold crypto assets, at an average amount of about £300 each.
The Bank’s financial policy committee, set up in the wake of the 2008 financial crisis to monitor risks, said on Monday there was little direct threat to the stability of the UK financial system from crypto assets.
However, it warned that, at the current rapid pace of growth, such assets could become more interconnected with traditional financial services and were likely to pose a number of risks.