Bitcoin trading is “gambling,” Canada’s central bank governor told CNBC on Thursday, adding that he was looking into developing regulations around cryptocurrencies.
Stephen Poloz, who heads up the Bank of Canada, said buyers of digital coins should “beware” and that he would not call cryptocurrencies assets.
“They are crypto but they are not currencies,” Poloz told CNBC during an interview at The Sanctuary in Davos.
“I’m not really sure what they are. They are not assets really … I suppose they are securities technically … There is no intrinsic value for something like bitcoin so it’s not really an asset one can analyze. It’s just essentially speculative or gambling.”
Poloz joins a chorus of central bankers and regulators warning about the dangers of cryptocurrencies which saw huge price surges in 2017.
Lars Rohde, the head of Denmark’s central bank, called bitcoin investing “deadly” last year.
Many business leaders have also warned on the dangers of investing in bitcoin including J.P. Morgan CEO Jamie Dimon who famously called the cryptocurrency a “fraud” while investing legend Warren Buffett said the space will “come to a bad ending.”
Poloz told CNBC that if the cryptocurrency market, which is highly volatile, were to crash, it would not have bad implications on the wider economy.
“One parallel we could draw would be the tech wreck. When we had the tech wreck, that was a much more widespread exposure. And the fact it had barely had perceptible effect on the real economy because it was not a stock market crash but just a segment of the stock market. But it was highly speculative, there was all kinds of bubbles there,” Poloz explained.
“So I think if you take that experience to heart, if something like that were to happen in the cryptocurrency space, it would probably be smaller today … It certainly has the potential. I don’t want to minimize the risk that you raised because any mania has the scope to get much bigger.”
Poloz told CNBC that the central bank will look to regulate cryptocurrency.
“I have no doubt that at least for the purposes of consumer protection … We will be developing regulations around this space in due course. But what we are being careful to do here is to not stifle innovation,” Poloz said.
