Portugal’s Central Bank Director Doesn’t Consider Bitcoin As a Currency
With the meteoric rise in Bitcoin prices in the past few weeks, major financial institutions have started taking this cryptocurrency seriously. The latest bull run in the Bitcoin prices has caused its valuations to soar above many of the prominent fiat currencies like the Singaporean dollar. However, Portugal’s Central Bank director,Hélder Rosalino, refuses to consider Bitcoin as a currency.
In his latest talk with the Portuguese publication ECO about the fintech revolution, Blockchain Technology and Cryptocurrencies in general, Rosalino said that it is important for people to know that “a cryptocurrency isn’t a currency”.
This director of Portugal’s Central Bank believes that a currency should have the ability to be used as credit and store its value. As per Rosalino, when a central bank is issuing a currency it is thereby creating a liability that needs to be paid later. He states :
“A currency, to be classified as such, needs to have two fundamental characteristics: The first is to associate itself with the idea of store of value, then, on that currency there must be a right to credit. When a central bank creates a currency, it creates a liability on its balance sheet that has to be paid. If, one day, everyone was to hand that currency over to their banks, than the central bank would have to pay, and the liability would be eliminated”
Rosalino hods a very little trust in cryptocurrencies saying that it isn’t regulated by any of the financial institutions and thus can’t be given as credit. While he considers cryptocurrencies to have a very limited futures, he believes that the Blockchain Technology has got some serious and potential applications. He said :
[A cryptocurrency] is a convention, a computerized solution based on a very powerful technological base, a fantastic network, the blockchain, which allows payments without intermediation. It allows me, through a virtual currency, to make peer-to-peer transactions without brokerage outside the financial system. But it is not a coin, so we look at cryptocurrencies with concern and caution because, recognizing the disruptive innovation associated with them, there are several risks.
Rosalino believes that there is a huge risk involved with cryptocurrencies because of its “speculative dimension”. Cryptocurrencies such as Bitcoins are generated through mining with a maximum limited number. Thus the increase in demand causes a spiral effect of increase in speculation and volatility.
Rosalino also sighted some of the legal concerns associated with cryptocurrencies saying “it may not be possible to exchange a virtual currency for a currency accepted by regulators and central banks.”
He also further talked about the use of cryptocurrencies for illegal money laundering practices.
Just when Bitcoin currently seems to be dominating the Bitcoin markets by convincingly going above $7000, there are few still personalities who remain not quite convinced about its long term future.
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