The President of the World Bank Group, Jim Yong Kim, has compared cryptocurrencies to “Ponzi schemes,” and thus, becoming the latest financial voice to raise questions about the legitimacy of digital currencies such as Bitcoin.
Kim’s expression of doubt about legitimacy of digital coins came amid slump in market for cryptocurrencies across the globe.
“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. It’s still not really clear how it’s going to work,” he said.
The global 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’s hope the technology could be used in developing countries to “follow the money more effectively” and reduce corruption, Kim added.
The value of cryptocurrencies soared in 2017 before slumping, with Bitcoin losing nearly two-thirds of its value since mid-December.
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.
Meanwhile, Nouriel Roubini, while discussing the downsides to cryptocurrencies, called Bitcoin the “mother of all bubbles.”
Also, in a speech this week, Bank of International Settlements’ Chief, Agustin Carstens, said there’s a “strong case” for authorities to rein in digital currencies because their links to the established financial system could cause disruptions.
Federal Reserve Chair, Jerome Powell, has said that “governance and risk management will be critical” for cryptocurrencies.