The chairman of UBS, Axel Weber, believes that Bitcoin’s prospects as a currency are bleak, but its blockchain holds promise.
His comments were made during a discussion at the Bank of England’s (BoE) Open Forum, according to a City A.M. report.
Intuitively, bitcoin’s shortcomings as a currency thus far would stem from issues like the absence of government backing, low interest from the broader public and high volatility. Weber approached it from a different angle, essentially saying that bitcoin cannot by printed by governments in times of need- a morally repugnant notion for many hardline Bitcoiners.
“Private currencies will fail to take off because there is no lender of last resort- there will always be boom and bust,” he said, in reference to the ability of central banks, such as the BoE, to print money in order to stabilize economies during a financial crisis. The BoE adopted the “lender-of-last-resort” role over 100 years ago, and similar policies (e.g. quantitative easing by the US Fed) have been employed to achieve such objectives, though they have been criticized.
“Liquidity is a public good, central banks are well placed to provide it,” said Bank of England deputy governor Minouche Shafik, echoing Weber’s sentiment.
Weber is the second major banking figure to express such a view on bitcoin during the past week. JPMorgan CEO Jamie Dimon recently commented that bitcoin’s prospects for survival are poor, and the blockchain’s potential significant, echoing previous comments he has made on the matter.
While the daily count of transactions continues to increase steadily, bitcoin has yet to become commonplace as a currency much beyond a relatively small group of supporters. In contrast, Bitcoin’s blockchain technology, and analogous distributed ledger systems inspired by it, are enjoying increasing interest from dozens of financial institutions.
Weber too had warm words for the blockchain, and since announcing its blockchain ambitions earlier this year, UBS has been one of the most visibly active players in the space. It announced its testing of a ‘Smart-Bond’, as well as a ‘Utility Settlement Coin’. It is also reportedly experimenting with Ethereum, upon which it has developed a prototype for a smart bond, and which it demoed at Ethereum’s ongoing Devcon1 conference in London:
— Cellabz (@cellabz) November 12, 2015