Retail investors enamoured with glitz of bitcoin need to tread careful as experts have raised fresh concerns about this cryptocurrency. Two University of Pittsburgh researchers, the father-son duo of Gunduz Caginalp and Carey Caginalp, said in their recent research paper that bitcoin is “an asset which has no value by traditional measures” and may be a bubble. Its price is largely driven by the opinion of fringe buyers, often holding erroneous views, they said.
It’s in this context one has to see the last week’s circular by the Qatar Central Bank (QCB). The central bank issued several circulars warning of the risk of trading in digital currency bitcoin.
The letter by QCB said it “politely requested banks and exchange houses in the country not to deal in any way with this currency, or exchange it with another currency, or open accounts to deal with it, or send or receive any money transfers for the purpose of buying or selling this currency”.
The circulars highlighted the negative consequences in global financial markets. And it is to be mentioned that this can be used in money laundering as well as using it for terror activities.
It’s not the first time that bitcoin and other virtual currencies such as ethereium, ripple XRT, litcoin, etc have come under global regulatory scrutiny, especially after the wild swings the market have witnessed recently. Having peaked at almost $20,000 in December, bitcoin was trading at about $8,550 on Thursday.
The World Bank chief has compared cryptocurrencies to Ponzi schemes. “In terms of using bitcoin or some of the cryptocurrencies, we are also looking at it, but I’m told the vast majority of cryptocurrencies are basically Ponzi schemes,” said World Bank Group President Jim Yong Kim. “It’s still not really clear how it’s going to work.”
Recently governments including in China, Russia, India and South Korea, took steps to crack down on it. Central banks in Europe, Japan and the United States have also flagged concerns about the unit. Several commercial lenders said they would stop allowing their customers to buy bitcoin through their credit cards owing to debt concerns.
May be there is a future about the technology of cryptocurrency and its applications. But the danger is that it’s not a replacement for cash and no global regulator recognised it yet as a legal tender. It’s in demand because of the greed of people for its unimaginable returns in the early days but now that is also waning due to the huge volatility.
And Qatar’s move appeared to be the strongest action taken so far among the countries in the region. It shows the future thinking of the wise leadership and financial regulators in the country.
The move by QCB must be appreciated and it is aimed at protecting customers from running up huge debts and losing money.
