Lee Ju-yeol, the Governor of Bank of (South) Korea has tried to cast doubts about cryptocurrencies particularly Bitcoin. He stated that cryptocurrencies have no intrinsic value and went on to predict further price volatility in the markets after the bloodbath of earlier today.
According to local news source called Yonhap, Ju-yeol said that it is very difficult to predict the price index of Bitcoin as it is all based on speculation and no intrinsic value. The official said:
It is very difficult to predict the price, but its price will be extremely volatile.”
Ju-Yeol Acknowledges the Lure of Cryptocurrencies
While much of this is regular central bank criticism against cryptocurrencies, Ju-yeol had some interesting observations. He did acknowledge that the reasons Bitcoin and other cryptocurrencies are appealing to people is because of dwindling fait in fiat currencies. He particularly tried to explain why people like institutional investment bankers and big companies like Tesla are now directly involved in the cryptocurrency business.
These assets saw a steep rise in the shortest period of time,” Lee stated. “I would say institutional investors’ assessment of using bitcoins as a hedge could be interpreted as another factor.”
Is the Criticism from Korea Valid?
While some of the criticism from the governor was harsh, it is understandable where that comes from. South Korean investors and public are constantly under attack from North Korean hackers. They have successfully targeted South Korean cryptocurrency exchanges, government organizations and private individuals at a large scale. So, naturally, the blame was put on Bitcoin when it is just a revolutionary medium of exchange.
Another Central Bank Digital Currency?
However, just like India and China, Korea is also looking at a possible digital currency project to offset the importance of cryptocurrencies. These Central Bank Digital Currencies (CBDCs) are expected to be stablecoins with full backing from the government. They are intended for borderless payments and can be used for seamless solutions around the world. However, stablecoins aren’t a new currency and still have to rely on fiat’s acceptance and suffer from the same inflationary mechanics. So, while CBDCS are expected to help commerce to grow and prosper, the long-term holding of these digital currencies makes little sense as of now.
All around the world, central banks are now growingly wary of the threat posed by Bitcoin and other cryptocurrencies in undermining national fiat currencies. The treasury chair of USA Janet Yellen also recently spoke out against Bitcoin and called it “inefficient”.
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