Bank of France in stark warning on bitcoin
Bitcoin’s dramatic gains have continued this week but it remains prone to wild fluctuations in value. The French central bank has entered the fray — they say it is not a currency and has no economic basis.
The Bank of France has issued a strong warning against further speculation on bitcoin, saying that the cryptocurrency has no economic basis and is a tool of speculation rather than a currency.
Bitcoin has been making headlines all year, having gone from a valuation of $700 (€589) per bitcoin at the start of 2017 to a valuation of $11,000 in recent days.
Its dramatic growth, combined with a regular penchant for volatility (it dropped back by 20 percent on Thursday from the $11,000 high), has led to much discussion as to whether bitcoin is a dangerous fad or the exciting crest of the wave of the future.
Giants of the global financial system such as JPMorgan Chase and Goldman Sachs have already been highly critical of bitcoin, openly questioning its viability. Now the central bank of France has entered the debate with arguably the starkest warning yet on the eight-year old digital currency.
A bubble or not?
"We need to be clear: bitcoin is in no way a currency, or even a cryptocurrency," the Bank of France governor Francois Villeroy de Galhau said at a press conference in Beijing on Friday.
Read more: Bitcoin hits $11,000
"It is a speculative asset. Its value and extreme volatility have no economic basis, and they are nobody's responsibility. The Bank of France reminds those investing in bitcoin that they do so entirely at their own risk," he added.
While bitcoin's gains this year have been startling, things have been especially dramatic in the past two months, as evidenced by a 400 percent increase in its value between one point in September and one point in November.
Read more: Why bitcoin is valued in Zimbabwe
However, its volatility of late has been even more pronounced than usual, leading to increasing fears that it is part of a bubble, that it has no meaningful value beyond as a means for speculation and that a costly crash is on the cards.