World Economy

No Eurozone Cryptocurrency in Sight

No Eurozone Cryptocurrency in Sight
No Eurozone Cryptocurrency in Sight

Bundesbank board member Carl-Ludwig Thiele has ruled out the introduction of official digital money for the eurozone 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 the weekly Euro am Sonntag in an interview, Reuters reported.

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 more than 30% 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.

Decentralized 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 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 favor making cryptocurrencies illegal but that potential investors must have detailed information on the risks of investments in bitcoin.

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