Tim Lane does not believe cryptocurrencies are the 'money of the future'
The value of bitcoin was slightly above $32K in the early hours of Thursday morning (Feb. 11), some way off the $48K it had reached in the previous 24 hours.
Such is the rollercoaster that cryptocurrency investors – many of them new to the market – are riding in this current wave of interest.
Events such as Elon Musk’s appearance on social audio app Clubhouse and Tesla’s subsequent announcement of a $1.5 billion investment in cryptos have fueled the rally in recent weeks.
Meanwhile, Mastercard announced that cardholders will be able to transact in certain cryptocurrencies and Twitter is also reported to be weighing how cryptos will fit into its future.
But there are plenty of detractors with Bank of Canada deputy governor Tim Lane among those urging caution.
“Speculative frenzy”
In a speech on payments and a series of media interviews this week, Lane said that the crypto rally is “speculative frenzy” and that the assets do not have the qualities to become the ‘money of the future’ that many would have us believe.
Referencing the power of Elon Musk, the bank official said that: “The recent spike in their prices looks less like a trend and more like a speculative mania -- an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price,” adding that the unstable purchasing power of cryptos like bitcoin make them a “flawed” payment method.
Lane’s words follow those of JPMorgan strategists. Commenting on the Tesla investment, they doubted many other big corporates would follow and whether “less speculative” institutional investors would also back cryptos in a significant way.
Asked if the Bank of Canada is planning to offer a digital currency, Lane said that in a fast-changing world it is keeping options open in the belief that the space should not be driven by the private sector.
“Only a central bank can guarantee complete safety and universal access, and with public interest -- not profits -- as the top priority,” he said. “We will issue such a currency only if and when the time is right.”
