Bitcoin too volatile to be accepted as legal tender, says BoE boss

Bank of England Governor Andrew Bailey has raised concerns about El Salvador’s adoption of Bitcoin (BTC) as legal tender after President Nayib Bukele announced the launch of Bitcoin City.

Bailey argued that El Salvador’s decision to adopt Bitcoin as a currency was alarming as consumers were likely to suffer from the extreme volatility of the cryptocurrency.

Bitcoin traded at around $ 43,000 on the first day of Bitcoin’s legal tender in El Salvador, and soared to a new all-time high of over $ 68,000 on November 9. BTC price has fallen significantly since then, with Bitcoin trading at $ 54,626 at the time of writing.

Bitcoin too volatile to be accepted as legal tender, says BoE boss
Bitcoin 90 Day Price Chart. Source: CoinGecko

“It worries me that a country would choose it as its national currency,” Bailey said at the Cambridge University Student Association performance, Bloomberg reported on November 25.

The governor also questioned whether the citizens of El Salvador even understand the nature and volatility of Bitcoin, which is what worries him most.

Bailey also cited a new statement from the International Monetary Fund (IMF) on El Salvador, which is responsible for tracking risks to global financial systems. The statement released on Monday outlined “significant risks” arising from Bitcoin as legal tender and Bitcoin trading in El Salvador.

Previously, the IMF warned about El Salvador’s Bitcoin law in June, which did not prevent the country from adopting it in September and accepting BTC as legal tender. Bailey added that the BoE is considering whether to introduce a central bank digital currency (CBDC), stating:

“There are strong arguments in favor of digital currencies, but from our point of view they need to be stable, especially when used for payments. This does not apply to crypto assets. “

Related: El Salvador’s dollar debt is falling on Bitcoin bond plans

The news comes shortly after BoE Assistant Governor for Financial Stability Sir Jon Cunliffe declared that CBDCs were a “revolution in the functionality of money through technology”. On the flip side, in a survey by Redfield & Wilton Strategies in August, the majority of the UK adult population was skeptical and concerned about a possible introduction of CBDC.