Over the weekend, it was China’s central bank. Now the Reserve Bank of India (RBI) is warning investors against betting on bitcoin and other crypto-currencies.
“So there’s only one thing we can do—watch it from the bank of a river,” Pan Gongsheng, deputy governor of the People’s Bank of China, said at an event in Shanghai. “One day you’ll see bitcoin’s dead body float away in front of you.”
The Indian central bank, however, was more straightforward, “cautioning users, holders and traders of virtual currencies (VCs), including Bitcoin, regarding the potential economic, financial, operational, legal, customer protection, and security-related risks associated in dealing with such VCs.” The RBI’s latest release reiterated the concerns it had raised twice before in December 2013 and February 2017.
Even as Virtual Currencies (VCs) including Bitcoins are recording all-new highs leading to a rush among investors wanting to capitalise on the sudden surge in their values over the last week, Reserve Bank of India doesn’t appear much enthused by the idea.
These warnings come in the wake of bitcoin’s skyrocketing value—up more than 1,000% this year. In India, its price has almost doubled in a month, from Rs4.55 lakh ($7,070) on Nov. 01 to Rs 8.6 lakh on Dec.05. The spike has led to a buying frenzy. RBI clarified that it has not given any licence or authorisation to any entity or company to operate such schemes or deal with Bitcoin or any VC. Bitcoin, the most popular crypto-currency at present, reached an all-new high on Wednesday and topped the $12,000 mark for the first time ever.
In fact, measures to curb the use of crypto-currencies have been gaining momentum across Asia. The central banks of Indonesia and Bangladesh have even barred the use of bitcoin as a payment tool. In September, China shut down bitcoin exchanges and banned initial coin offerings.
Other regions, too, have raised red flags. On Nov. 29, the vice-president of the European Central Bank warned against investing in bitcoin at such high prices. The governor of the Bank of France cautioned against its potential hazards, as did Russian president Vladimir Putin and Germany’s central bank.
In India, besides the RBI, the government, too, has made public its discomfort with bitcoin. On Nov. 30, finance minister Arun Jaitley said India does not recognise virtual currency as legal tender. Earlier this year, a committee set up by his ministry had reportedly recommended banning cryptocurrencies over fears that they could be used to launder money and perpetuate frauds.
Yet, cryptocurrency exchange operators remain unfazed. “If India had to ban virtual currencies, they would have done that by now. In the last three years, the RBI’s statement has been the same: They are uncomfortable with it and people should invest at their own risk,” Vivek Steve Francis, CEO of Coinome, a cryptocurrency-trading exchange, told Quartz late last month.
Legendary investor Warren Buffett had said in an interview to CNBC in 2014 that bitcoin is a “mirage”, adding that investors should “stay away from it”. In the same interview, Warren Buffett said, “It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A cheque is a way of transmitting money, too. Are cheques worth a whole lot of money just because they can transmit money? The idea that it has some huge intrinsic value is just a joke in my view.” Reiterating his belief on Bitcoins and cryptocurrencies, Warren Buffett told Marketwatch in October this year: “You can’t value bitcoin because it’s not a value-producing asset,” adding that it is a “real bubble in that sort of thing”.
The rapidly surging price of Bitcoin, without any underlying asset or value-base, has irked the top banker Jamie Dimon. “Bitcoin is a fraud and will blow up,” Jamie Dimon, the CEO of JPMorgan Chase, said earlier this year, adding, “The currency isn’t going to work.” He pointed out to the absence of an underlying monetary base to support its value. “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” Jamie Dimon said.
Renowned investor Jim Rogers, sometimes referred to as commodities guru, too has sounded a note of caution on the prospects of cryptocurrencies, preferring to stay away from them for now. “I wish I was smart enough to buy cryptocurrencies.” Jim Rogers said in a recent interview with Kitco news. Further, Jim Rogers seemed to suggest that there might be a bubble building up in the cryptocurrency space. “It looks bubblish when you see the kind of price we see in bitcoins,” Jim Rogers said, adding that he doesn’t own any of the cryptocurrencies. “I certainly don’t know which one will come out on top, or if anyone comes out on top. But, I don’t own any.”