Bitcoin Too Volatile To Be Adopted As Legal Tender, BoE Chief Says

Bank of England Governor Andrew Bailey has expressed concern over El Salvador’s acceptance of Bitcoin (BTC) as legal tender after President Nayib Bukele announced the launch of Bitcoin City.

Bailey argued that El Salvador’s decision to use Bitcoin as a currency was alarming as consumers are likely to suffer from the cryptocurrency’s extreme volatility.

Bitcoin traded around $43,000 on the first day of Bitcoin’s acceptance as legal tender in El Salvador, and soared to a new all-time high of over $68,000 on November 9. The price of BTC has since fallen significantly, with Bitcoin trading at $54,626 at the time of writing.

Bitcoin 90 Day Price Chart. Source: CoinGecko

“It worries me that a country would choose it as its national currency,” Bailey said during the Cambridge University student union appearance, Bloomberg reported Thursday.

The governor also questioned whether Salvadorans understand the nature and volatility of Bitcoin at all, which is of major concern.

Bailey also cited a new statement on El Salvador by the International Monetary Fund (IMF), which is responsible for monitoring risks to global financial systems. Released on Monday, the statement outlines “significant risks” arising from Bitcoin as legal tender and Bitcoin trading in El Salvador.

The IMF warned against El Salvador’s Bitcoin law earlier in June, which did not stop the country from adopting it in September and accepting BTC as legal tender. Bailey added that the BoE is studying whether to launch a central bank digital currency (CBDC), stating:

“There are strong arguments for digital currency, but in our view it should be stable, especially if it is used for payments. That does not apply to crypto assets.”

Related: El Salvador’s Dollar Debt Plunges on Bitcoin Bond Plans

The news comes shortly after Sir Jon Cunliffe, BoE’s deputy governor for financial stability, stated that CBDCs are a “revolution in the functionality of money powered by technology”. On the other hand, the majority of the UK adult population was skeptical and concerned about a potential CBDC adoption in an August survey by Redfield & Wilton Strategies.