NZ Reserve Bank governor thinks Bitcoin is a bubble - but does see a future for digital currencies

December 10, 2017

Acting RBNZ Governor Grant Spencer told Q+A Bitcoin is not useful as a currency because of its volatility, but he sees similarities between it and gold.

The acting Governor of New Zealand's Reserve Bank says he suspects Bitcoin to be a bubble, but that cryptocurrencies are still a "part of the future".

Bitcoin has risen from a value of about US$1000 (NZ$1460) per coin at the start of the year to touching on highs of more than US$18,000 (NZ$26300) on some exchanges this week.

Grant Spencer, speaking this morning to TVNZ 1's Q+A programme, said he saw similarities between the world's most popular digital currency, Bitcoin, and other commodities such as gold.

"It looks remarkably like a bubble forming to me - we've seen them in the past, over the centuries ... and this appears to be a bit of a classic case," Mr Spencer said.

"With a bubble, you never know how far it's going to go before it comes down."

Bitcoin and other cryptocurrency's prices can fluctuate wildly, With gains or losses of tens or even hundreds of per cent over 24 hours not uncommon.

Mr Spencer said cryptocurrencies are a "part of the future" and said he believed a more stable digital currency would be more useful.

"I think the cryptocurrencies are a real and serious proposition for the future and I think they are part of the future - but not the sort that we see in Bitcoin," he said.

"Bitcoin to me is very much like gold - it's mined, it has a fixed quantity and the price is very volatile.

"A cryptocurrency that has a more stable value will be the cryptocurrency that is more valuable for the future - to be a useful currency it has to be stable value in terms of facilitating payments, as opposed to just a speculative instrument like gold or like Bitcoin."

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