Deutsche Bundesbank board member Carl-Ludwig Thiele has issued his second warning on bitcoin this year.
In an interview with the Frankfurter Allgemeine Zeitung published on Sunday, Thiele reiterated his position that bitcoins are not a means of payment, but are instead a highly speculative financial tool.
He pointed to several high-profile bitcoin heists over the last few weeks to back up his statements, German financial magazine Handelsblatt reports.
Thiele also talked about volatility, which is perhaps hardly surprising, since the price of bitcoin has dropped by almost half since he made his original statement in early January.
He further said that such volatility can undermine the seemingly cheaper online payments offered by bitcoin payment processors:
“Bitcoin users often assume that Internet payments with bitcoin are cheaper than international bank transfers or paying with a credit card. They forget, however, that the price of bitcoins fluctuates greatly, among other things. Ultimately, the losses can quickly become considerably higher than transfer or credit card fees.”
Call for regulation
Thiele pointed out that digital currencies are a relatively recent phenomenon and that there is no regulatory framework that can deal with them. He added that the Bundesbank’s Executive Board would like to see an appropriate way of dealing with them internationally.
Such regulations that exist are not harmonised, he said, and different states have different laws, or different ways of interpreting and applying them to digital currencies.
Thiele added that discussion about digital currencies among EU regulators is still in the early stages and that the European Banking Authority has formed a workgroup tasked with looking at digital currencies.
Today’s warning is not Thiele’s first. Back in January, Thiele told Handelsblatt that bitcoins are a highly speculative investment and pointed out that European regulators have not taken any concrete steps to regulate digital currencies.
Thiele said the price of digital currencies is not being driven by fundamentals – a factor that breeds volatility. He also warned that there is simply no guarantee investors will be able to exchange their bitcoins in the future, adding that the Bundesbank has “warned emphatically” against these risks.
Previously, in December 2013, Bundesbank President Jens Weidmann said that bitcoin is not an alternative to national currencies and that the driving factor behind demand for bitcoin is a purely speculative hope of big payouts for investors.
While the EU has done little to address digital currencies, regulators in some parts of the world are a bit more proactive.
New York State is at the forefront of the regulatory push. Last week the state started accepting applications for digital currency exchanges, which will be regulated under new state legislation that is expected to be enacted by the end of the second quarter of 2014.