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Interview 23.12.2017

"Risk of breathtaking losses"

Interview with the business weekly Euro am Sonntag

Interview with Carl-Ludwig Thiele conducted by Birgit Haas.
Translation: Deutsche Bundesbank

How do you explain the huge swings in the value of digital currencies like Bitcoin?

For many market players speculation is the name of the game. The market is relatively illiquid and trading volumes are so small that minimal shifts in supply and demand quickly trigger strong price volatility.

Your institution is advising investors to steer clear of Bitcoin. Why is that?

The Bundesbank doesn't recommend what investors should do with their money – but it does highlight risk. The value of Bitcoin is highly volatile – and not just in comparison to the euro or US dollar. That’s what makes it a poor store of value. On top of that, the costly and inefficient Bitcoin payment system suggests that it is unsuitable as a means of payment.

Does the Bundesbank think a bubble is forming?

You only know there’s a bubble when it bursts. We are seeing a breathtaking increase in value, and that brings with it the risk of breathtaking losses.

Bitcoin came on the scene in the wake of the financial crisis. Do you think there’s a connection?

Part of the motivation behind virtual currencies probably does stem from the period of critical reflection in the financial system back then. It remains one of the long-term tasks of a national central bank, and of fiscal policy as a whole, to cement trust in our currency and our financial system. After all, our currency, the euro, is primarily based on trust. And trust is something that's easy to lose and hard to gain.

Looking to the future, do you think we could see the introduction of a state-backed cryptocurrency in the euro area?

Central bank-issued digital money which offers the same functions as cash is not on the cards at present, though there is a debate on the benefits which central bank-issued digital currency can offer in a closed system for settling transactions.

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Additional information

In conversation

Carl-Ludwig Thiele

Interview with Carl-Ludwig Thiele,
Member of the Executive Board of the Deutsche Bundesbank until 30 April 2018

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