BoE’s Andrew Bailey: 'Only buy crypto if you are prepared to lose all your money'

Central bank chief dismisses cryptos as viable currencies

(FILES) File photo taken on September 24, 2020 showing a physical imitation of a Bitcoin at a crypto currency "Bitcoin Change" shop, near the Grand Bazaar, in Istanbul. - The market of crypto currency in Argentina, even if small, grows by leaps and bounds launched by economic difficulties, the shortage of dollars and the high inflation, which average surpassed 45% since February, 2021. (Photo by Ozan KOSE / AFP)
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Bank of England governor Andrew Bailey warned investors against buying cryptocurrencies on Thursday, urging enthusiasts to only “buy them if you’re prepared to lose all your money”.

When Mr Bailey was asked by journalists whether the BoE was concerned about wild price swings in the cryptocurrency markets, he said: “I’m afraid they don’t have intrinsic value.”

“Now that doesn’t mean to say that people don’t put value on them because they can have extrinsic value. But they have no intrinsic value,” Mr Bailey said.

“So, I’m going to say this very bluntly again; buy them only if you’re prepared to lose all your money. I'm afraid currency and crypto are two words that don't go together for me."

The BoE chief was speaking at the end of a press conference on the central bank's latest Monetary Policy Report, in which the lender said it expected the UK economy to expand 7.25 per cent this year as the country eases out of the Covid-19 crisis.

The bank held interest rates at record lows on Thursday and kept the size of its stimulus programme unchanged, with Britain set to enjoy its strongest peacetime growth as Covid-19 restrictions ease.

Bitcoin and ethereum, the two biggest cryptocurrencies, surged to record highs earlier this year as institutional investors piled into the digital asset space and retailers flocked back.

Meanwhile, Meme-based virtual currency Dogecoin soared to an all-time high this week, extending its 2021 rally to become the fourth-biggest digital coin.

Dogecoin, launched as a satirical critique of 2013's cryptocurrency frenzy, has risen more than 14,000 per cent since December 31, taking it past more widely-used cryptocurrencies such as the Tether stablecoin and XRP to become the fourth-largest by market capitalisation.

Mr Bailey has long been dismissive of the assets. In January he told the World Economic Forum that existing cryptocurrencies are unlikely to last as a means of payment over the long term.

He said while there been huge innovation in payments in recent years and that digital innovation is here to stay, existing digital currencies do not have a structure that will allow them to last.

“Have we landed on what I would call the design, governance, and arrangements for what I might call a lasting digital currency,” he asked the WEF panel. “No, I don't think we're there yet, honestly. I don't think cryptocurrencies as originally formulated are it."

Last month, the BoE said it would join forces with the UK Treasury to weigh the potential creation of its own central bank digital currency, joining authorities across the globe exploring the next big step in the future of money.

If approved, the UK’s digital currency would exist alongside cash and bank deposits, rather than replacing them, the central bank said.

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