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Bitcoin sinks under $50,000 as Bailey sounds new crypto warning

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Bitcoin sinks under $50,000 as Bailey sounds new crypto warning

Bitcoin fell below $50,000 on Thursday as Bank of England Governor Andrew Bailey warned that anyone investing in the digital currency should be prepared for massive losses.

The cryptocurrency slipped under $47,000 following an announcement by Elon Musk that his electric car company Tesla would no longer accept it for payment due to concerns about the amount of energy it uses.

Meanwhile, Mr Bailey issued a fresh warning to punters thinking about a bet.

Speaking at a Bank of England citizens’ panel event, he said: “You’ve probably seen all the stories about the price of bitcoin, share prices in the U.S. suddenly rocketing up for companies that nobody quite knows what they do.

 “That’s a warning sign. People are looking for investment opportunities. Buy it if you want but it has no intrinsic value.”

It came as the Bank of England's deputy governor, Sir Jon Cunliffe, said the institution needs its own digital pound to provide a safe harbour when a crisis hits the banking system.

Sir Jon said the existing payments system could be stuck in a “Blackberry world” shortly before an iPhone-style revolution as central banks mull issuing their own digital currencies.

The Treasury and Bank are exploring whether to launch a digital pound as investors pour billions into Bitcoin and other cryptocurrencies.  

Bitcoin

Sir Jon said it “looks probable” that the Government would need to issue a "Britcoin" if it wanted to ensure public confidence in future crises with state-backed money. 

The vast majority of money held and used in transactions is in digital "private money" issued by commercial banks ,rather than "public money" issued by the Bank in the form of physical cash. However, that access to "public money" is declining as the use of cash falls.

Sir Jon warned that no access to any "public money" in a time of crisis could undermine confidence in the whole system. 

A Bank-backed digital currency could therefore shore up public confidence, or they may be “locked into private money”.

“It is not at all certain whether the Bank of England could continue to provide that anchor, particularly in times of stress, if the public did not have access to the money it issues,” he said.

Governor Andrew Bailey has said the case for having a digital currency is “not a slam dunk” and some analysts are concerned it could have a detrimental impact on the banking system.

Sir Jon said the Bank is investigating the impact a state digital currency could have on bank business models, but sounded a warning to lenders: “The Bank of England doesn't have the responsibility or a brief to preserve the current model of banking. We have a responsibility to preserve financial stability.”

Meanwhile, Coinbase revealed it signed up millions of new cryptocurrency traders in the first three months of the year amid the Bitcoin boom. 

The exchange, which enjoyed a $100bn debut on the Nasdaq in April, saw an average of 6.1m monthly transacting users during the first quarter of 2021, compared to 1.3m a year before. This marks its highest growth since the so-called “crypto winter” began in 2018.  

As the fear of missing out on the crypto roller coaster pushed the price of digital coins to record highs in this year, Coinbase’s trading volumes increased $305bn from last year from $30bn. Most consumers traded Bitcoin and Ethereum, which made up 39pc and 21pc, respectively.

Despite impressive results, Coinbase warned shareholders that its business continued to be “inherently unpredictable” as transaction fees, which are it's biggest revenue driver and expense, will fluctuate with cryptocurrency volatility. 

Reference: Telegraph; Tom Rees, Margi Murphy  

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