World Bank boss warns on cryptocurrency risks - Taipei Times
Fri, Feb 09, 2018 - Page 10 News List

World Bank boss warns on cryptocurrency risks

Bloomberg

A worker checks the fans on miners at the cryptocurrency farming operation Bitfarms in Farnham, Canada, on Friday last week.

Photo: Reuters

The head of the World Bank compared cryptocurrencies to “Ponzi schemes,” the latest financial voice to raise questions about the legitimacy of digital currencies such as bitcoin.

“In terms of using bitcoin or some of the cryptocurrencies, we are also looking at it, but I’m told the vast majority of cryptocurrencies are basically Ponzi schemes,” World Bank Group president Jim Yong Kim said on Wednesday at an event in Washington. “It’s still not really clear how it’s going to work.”

The development lender is “looking really carefully” at blockchain technology, a platform that uses so-called distributed ledgers to allow digital assets to be traded securely.

There is hope the technology could be used in developing countries to “follow the money more effectively” and reduce corruption, Kim said.

The value of cryptocurrencies soared last year before slumping, with bitcoin losing nearly two-thirds of its value since mid-December last year.

While cryptocurrency technology has the potential to reshape global finance, concerns have been raised about its volatility and the potential for money laundering or other crimes.

In a speech this week, Bank of International Settlements general manager Agustin Carstens said there was a “strong case” for authorities to rein in digital currencies, because their links to the established financial system could cause disruptions.

US Federal Reserve Chairman Jerome Powell has said that “governance and risk management would be critical” for cryptocurrencies.

For the first time ever, the US Securities and Exchange Commission’s Office of Compliance Inspections and Examinations put cryptocurrencies and initial coin offerings on a list of focal points for scrutiny this year at the financial firms and advisers the agency oversees.

The markets for such products “present a number of risks for retail investors,” the office said.

Earlier this week, European Central Bank President Mario Draghi told the European Parliament that the central bank’s supervision arm is studying the risks digital currencies might pose to banks’ balance sheets.

He said that while financial institutions have so far shown limited appetite for the assets, he singled out the introduction of bitcoin futures contracts on US exchanges as a potential risk.

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