The popularity of cryptocurrencies represents a search for yield that could be a warning sign, according to Bank of England Governor Andrew Bailey.
“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,” he told a Bank of England citizens’ panel event. “That’s a warning sign. People are looking for investment opportunities. Buy it if you want but it has no intrinsic value.”
Bitcoin plunged 15% at one point to below $50,000 during Thursday’s session after Tesla Inc.’s Chief Executive Officer Elon Musk said the company had suspended vehicle purchases using the digital currency.
The central bank is a few years off introducing its own digital currency, Bailey added. Earlier on Thursday, Deputy Governor Jon Cunliffe said in a speech that governments should embrace digital currencies or risk private companies taking control of the money people use.
Bailey also said:
- The economy is already recovering rapidly and the BOE is watching inflation “very carefully”. Part of the reason for its forecast for faster inflation is that oil and energy prices were low this time last year
- The sectors likely to recover most this year were entertainment, sports, dining and drinking, which were hit hardest by the pandemic. They “employ a lot of people, they’re intense human-contact industries, and they also tend to employ a large proportion of lower-paid people.”
- “We want the banking system to support the economy, not the other way around.”