A top European Central Bank (ECB) official, Yves Mersch, has said that many are unaware of Bitcoin’s risks and that the cryptocurrency faces legal uncertainty.
His views were expressed in a speech at the Bundesbank conference. Bundesbank is the central bank of Germany, and as such is the most influential member of the European System of Central Banks (ESCB).
The ease of getting into the technology can mask its underling risks, he said:
“Although interested parties can very easily download the application for Bitcoin, they neither understand how this payment system works exactly, nor the risks they run when using it.”
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While Bitcoin does offer the advantage of avoiding exchange fees and like in cross-border payments, he argued that Bitcoin’s volatility can also contribute to unexpected exchange risk.
The absence of any regulation can entail losses of up to 100% of one’s investment, as there’s no insurance.
Euro banknotes are thus superior to Bitcoin, he argued, as their value is far more stable and their acceptance is compulsory.
He also discussed another form of alternative currency- money vouchers. They have been gaining popularity in China especially due to the country’s tight financial controls. Even physical regional currencies, like Germany’s Chiemgauer, are more suitable with over 700,000 units in circulation and its acceptance by over 900 companies and associations.