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Bank of England Gov: Bitcoin Does not Meet the Standards of traditional Currency

Dave Ramsden, who serves as the deputy governor for markets and banking at the Bank of England did an interview with CNBC recently. In the interview, Ramsden mentioned that currencies in digital form such as Bitcoin are too unpredictable. As such, they are too risky to have a store of value and does not satisfy the concept of traditional currencies.

The Bank of England Governor quoted the research conducted by the Financial Policy Committee. Ramsden argued that due to the volatile nature of cryptocurrencies, and the high costs of crypto transactions, cryptocurrencies are not as practical when used as a currency.

Ramsden stated:

Just a year ago, the Financial Policy Committee looked at crypto assets in some details supported by the fintech hub.

Ramsden emphasized the results obtained by the study of FPC, which deemed that crypto assets cannot be a store of value because of its volatile nature, which is also supported by the movement of their value in the previous year.

He also added:

“And also, as a medium of exchange, the costs of transactions were very expensive so it didn’t really satisfy those basic principles of being a currency.”

Unpredictable movements for usually a problem for any investor who wants to invest in a particular asset class. Bitcoin and any other cryptocurrency is no exemption. Investors are anticipating crypto assets to be volatile because it is a new asset class. This makes to crypto assets being perceived as a high-risk investment.

A lot of industry officers and investors in the crypto industry agrees that cryptocurrencies still have a chance of failure in the long term despite its very successful start. This is especially more glaring if cryptocurrencies fall short of getting enough mainstream use and applications. Bitcoin and cryptocurrencies must also be able to progress as practical currencies.

Wences Casares, a director at PayPal who is also working as the CEO of Xapo has been very vocal of his support for cryptocurrencies, especially Bitcoin. His opinion is the opposite of Dave Ramsden’s views on the matter. He shared his support for Bitcoin in an essay, in which he said Bitcoin’s chance of succeeding is at least 50%.

Casares said:

“In my (subjective) opinion those chances of succeeding are at least 50%.”

He also mentioned that if Bitcoin did succeed, it can see a 250 times increase in value, from its current value of $4,000 to more than $1 million in a span of only 7-10 years.

The history of Bitcoin

Looking at Bitcoin’s history over the past 10 years, it is reasonable to have investor’s confidence in the asset. Bitcoin has shown tremendous growth, even though there are a few times in which its value has gone down.

Bitcoin as an asset class is a different matter. Bitcoin has existed long as a cryptocurrency, but as an asset class, it is still very new. Crypto assets have extreme volatility, so the criticism directed at it is understandable.

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