Stablecoins More Stable than ‘Flawed’ Bitcoin; Only a Central Bank Should Issue a Digital Currency: Bank of Canada Official
Deputy Governor Tim Lane calls the ongoing price action in the crypto market a “speculative mania,” while ECP President says adding Bitcoin to its reserves is “out of the question."
As Bitcoin hits new highs, a top Bank of Canada official calls out “speculative mania” going on in the space.
In a speech on “payments innovation,” Deputy Governor Tim Lane said such assets do not have the qualities to become money and that they are “flawed” methods of payment because of their unstable purchasing power and costly verification methods. Lane said Wednesday,
“The recent spike in their prices looks less like a trend and more like a speculative mania — an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price.”
Lane further said that crypto assets only work as a method of payment for “illicit transactions,” sentiments that are shared by Christine Lagarde, president at the European Central Bank, who said last month that crypto has been enabling “funny business.”
On Wednesday, during a conference call with The Economist, Lagarde said the central bank owning BTC is “very unlikely — I would say it's out of the question.”
When the Time is Right!
Stablecoins, according to Lane, can be more stable than cryptocurrencies, but only to add that if demand for such assets does surface, central banks should be the ones to issue them.
“Only a central bank can guarantee complete safety and universal access, and with public interest — not profits — as the top priority,” according to Lane. “We will issue such a currency only if and when the time is right.”
During his speech, Lane said the shift to online activities caused by the pandemic is forcing the central bank to accelerate its efforts in this direction.
“Our view remains unchanged: a digital currency is by no means a foregone conclusion,” said Lane. “That said, the world has been changing even faster than we expected.”
The Bank of Canada is monitoring scenarios that could lead it to issue its own digital currency. The bank has engaged with three university project teams independently to advance its work on digital currency.
The research will be released Thursday, which Lane said will help inform the bank’s thinking.