ECB official: Bitcoin and cryptocurrencies are like a gold rush with no gold

 
Lynsey Barber
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Authorities are keeping a close eye on bitcoin (Source: Getty)

A top official at the European Central Bank has warned that the rise of bitcoin and other cryptocurrencies is like a gold rush - "but there is no gold".

Yves Mersch, a member of the ECB executve board said the group's views were "fully in line" with the views of the Bank of International Settlements, the head of which called bitcoin a bubble and a Ponzi scheme earlier this week.

Mersch said the group of central bankers have "similar worries".

Read more: Bitcoin is a bubble and a Ponzi scheme according to this top banker

"The question is not so much that these virtual currencies are already at a level that would cause huge disruption in the real economy, but we are currently more concerned about the social and psychological effect they seem to have," he said in an interview with Bloomberg on Thursday morning.

"In this respect money has to do with confidence and that's why we, central bankers, feel that we have a certain role to play to preserve confidence of the public in our legal tender. There is so much money flowing in that it's like a gold rush - but there is no gold."

The value of bitcoin has dived in 2018 after an astonishing rise at the end of last year.

Mersch welcomed the "clear positions" banks have taken on their own initiative of not venturing into the gold rush.

Read more: Bitcoin just dipped below $6,000

On the ECB taking any action on the matter of cryptocurrencies, he said: There is an area of investor protection, then there is oversight of the financial market infrastructure. If you increasingly have bridges between the virtual world and the real world and then there is a collapse in this virtual world, it could drain liquidity from the real world. This then becomes a concern for the central bank."

He added: "What is relevant to us is that we protect the functioning of our open market economy. At the same time, if someone wants to play Casino, let him do it, but then we shouldn't mutualise losses with the rest of the society."

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