Bitcoin too volatile to be adopted as legal tender, says BoE chief

Andrew Bailey, governor of the Bank of England, expressed concern over El Salvadors acceptance of Bitcoin (BTC), as legal tender following President Nayib Bukeles announcement of Bitcoin City.

Bailey claimed that El Salvadors decision not to accept Bitcoin as its currency was alarming, because it could lead to severe volatility for consumers.

Bitcoin spiked to an all-time high of $68,000 on November 9, after it traded at $43,000 the day El Salvador adopted Bitcoin as legal tender. Since then, Bitcoins price has fallen significantly. Bitcoin traded at $54,626 as of the writing.

Chart of the Bitcoin price over the past 90 days. Source: CoinGecko

Bailey stated that it was concerning to him that a country would choose it for its national currency during a Cambridge University student union appearance. Bloomberg reported this on Thursday.

The governor also asked whether Salvadorans understood the volatility and nature of Bitcoin, which is his greatest concern.

Bailey also mentioned a new statement by the International Monetary Fund on El Salvador, which is responsible to track risks to global financial system. The statement, which was issued Monday, outlines the “significant risks” that Bitcoin can pose to El Salvadors legal tender of Bitcoin trading.

In June, the IMF issued a warning about El Salvadors Bitcoin Law. However, that didnt stop El Salvador from adopting it in September and accepting BTC legal tender. Bailey stated that the BoE is currently studying whether to create a digital currency central bank (CBDC).

There is strong support for digital currencies. However, we believe it must be stable, especially if its used for payments. This is not true for crypto assets.

Related: El Salvadors Dollar debt plunges on Bitcoin bond plans

This news comes just after Sir Jon Cunliffe, BoE deputy governor of financial stability, declared that CBDCs were a “revolutionary in the functionality and money-driven by technology”. However, the overwhelming majority of British adults were skeptical about a possible CBDC adoption according to an August survey conducted by Redfield & Wilton Strategies.