The heads of central banks continue to speak negatively about cryptocurrencies. What is the reason for the radical position of regulators on digital coins, and what prevents countries from introducing tough measures against cryptoassets.
Heads of national banks and financial regulators often speak negatively about cryptocurrency. The last such statement was made by the Governor of the Bank of Japan Haruhiko Kuroda, Bloomberg reports . He criticized Bitcoin for its volatility and speculativeness and questioned whether the main cryptocurrency could be used for investment.
The head of the Bank of Korea, Lee Zhu Yel, previously stated that the spread of crypto trading among individuals for borrowed funds in South Korea threatens the country’s financial system due to the instability of digital assets.
Danish National Bank Governor Lars Rode also called bitcoin a “speculative fad” that central banks in other countries may ignore. He also criticized digital assets as their value is highly volatile.
The head of the Bank of England, Andrew Bailey, warned crypto investors about the danger of losing funds back in March . According to Bailey, bitcoin cannot be a stable store of value or an efficient instrument for transactions. In his opinion, the main cryptocurrency is unsuitable for use as a payment instrument and is too risky for investors.
Criticism is justified
Bitcoin is criticized by central banks and other regulators because it is a decentralized currency that cannot be controlled, said Nikolai Klenov, financial analyst at Raison Asset Management. According to him, now many countries, including Russia, are moving towards their own digital currencies – in fact, stablecoins, backed by national currencies. The emission of the digital ruble or digital yen can be controlled by central banks, as well as tracking transactions and calculating taxes on them, the analyst noted.
“To put it simply, cryptocurrencies scare regulators,” added Nikolai Klenov.
The Bank of Russia plans to start testing the digital ruble in 2022. To do this, by the end of 2021, a prototype of the new currency platform will be presented.
Bitcoin is a technology for transferring value without the participation of intermediaries, said Vitaly Kirpichev, director of development for the TradingView platform in Russia. In classical economics, the circulation of money takes place with the help of intermediaries in the form of commercial banks, and the central bank, in turn, acts as an intermediary for them. But when there is a peer-to-peer money transfer technology – from the sender to the recipient directly, this system becomes unnecessary, the expert explained.
“In theory, it seems that such a technology is a natural evolution of money circulation and the future belongs to it,” says Vitaly Kirpichev.
Possible measures against cryptocurrencies
Many countries are loyal to the development of blockchain and cryptocurrencies, so they do not impose direct bans on them, says the director of development for the TradingView platform in Russia.
In some cases, regulators cannot ban cryptocurrencies because their development and adoption has gone too far, says an analyst at investment firm Raison Asset Management. Not only Tesla and Square bought bitcoin in the US, he said, many large hedge funds bought it, even Ray Dalio, the head of the largest hedge fund and the most famous investor after Warren Buffett, said that bitcoin is an interesting investment asset.
Twitter founder Jack Dorsey’s company invested in cryptocurrency in February 2021 and October 2020. Currently, 5% of Square’s reserves are held in Bitcoin. The automaker Tesla also announced a $ 1.5 billion purchase of bitcoins in February . In March, the company sold 10% of digital coins, recording a profit of $ 101 million.
The fact that Ray Dalio owns the cryptocurrency became known on May 24. The investor said that in the current environment, the main cryptocurrency looks like a more attractive store of value than gold.
“If Bitcoin is now completely banned in the United States, this can lead not only to social discontent, but also to problems for major market players,” Nikolai Klenov added.
Earlier, the US Treasury proposed to the administration of President Joe Biden to introduce an obligation to transfer information about crypto transactions worth more than $ 10 thousand to the Internal Revenue Service (IRS). The country’s authorities have called cryptocurrencies a problem that contributes to illegal activities, including tax evasion.
Chinese authorities are calling for stricter regulation of mining and cryptocurrency trading. May 21 on the need to take action against the production of digital assets and kriptotreydinga said Vice-Premier of the State Council of China Liu He. Later, the Chinese government news agency Xinhua published an article “Urgently Eliminate the Hype and Chaos around Virtual Currency,” which highlighted four risks associated with trading and using cryptocurrencies: market, transactional, technological and legal.
Uncertainty in the regulation of digital assets and the negative position of central banks discourage large investors from investing in bitcoin, since they cannot buy cryptocurrency illegally or without declaring, as individuals can do, the analyst explained.