Central Bankers Warn Bitcoin Poses Risk To Financial System

[Editor's Note: The following post is by TDV Editor-In-Chief, Jeff Berwick]

Central bank officials from several countries have expressed their view that digital currencies like bitcoin represent risks to the dominant banking system, with many officials suggesting digital currencies could undermine the current money and banking system as well as the sovereignty of the nation-state. Bitcoin’s historical price rise has done much to bring bitcoin into the public eye:

Senior Central Bank of Ireland official Gareth Murphy was the most recent official to espouse that bitcoin poses a threat to financial stability. He made the comments last week at a conference in Dublin called BitFin 2014. He suggested the more consumers use digital currencies for transactions the likelier it becomes that governments will receive less revenue, meaning fewer people will allow themselves to be victimized by taxation (theft) which is used for murder and to pay off cronies. He also said digital currencies could undermine a bank’s ability to influence the economy’s price of credit, stripping the power of central banks to manipulate the price of money in the economy. 

“At the outset, I think that it is important for me to state my belief that developments in mobile and information technology are very likely to change the landscape of financial services in the coming years.  (And indeed, there have been a number of reports written on this subject recently),” said Murphy.

Murphy’s recent warning has not been the only bitcoin-related warning rolling off the lips of a central bank official. The Bank of Canada expressed a similar view in May. According to the Bank of Canada, bitcoin could pose this threat if it ever became “a significant means of payment.” The bank went on: 

“Governments may become concerned about legal security and law enforcement issues associated with Bitcoins. For example, the private nature of bitcoin transactions, bitcoins could easily be used to facilitate criminal transactions and to evade taxes,” he said although he seems confused about what is crime or not.  The true crime is the taxes themself… without that there is no “criminal transaction”.

In a May 9, 2014 meeting the Federal Advisory Council (FAC) of the Federal Reserve discussed bitcoin, and the question was posed, ‘Does Bitcoin pose a threat to the banking system, economic activity, or financial stability?’. The group deduced “There is the potential for Bitcoin to act as a ‘contagion’ of instability because of its volatility and lack of connection with the rest of the financial networks already in place.”

Other central criminal organizations (central banks) have stated that bitcoin does not pose a risk to the financial system, such as the Federal Reserve and European Central Bank.  They are totally incorrect and Gareth Murphy of the Bank or Ireland is correct.  Bitcoin has the potential to completely eradicate the entire criminal centralized banking cartels, the bankster financial system and even better, violent and thieving government as we know it!

The technology will continue to metastasize and grow and most smart individuals, mostly in the technological space I know, who are not already anarchists or libertarians, remain very skeptical of bitcoin but also open-minded. I feel like they are where I was in 2011. So once these types of individuals experience that “aha-moment” – financial advisors, economists, bankers, technology entrepreneurs – things will become much different. For now most slaves haven’t even heard of bitcoin which portends very well for its future rise.

Everyone acknowledges how small bitcoin is at the current stage. For this reason many bankers do not think bitcoin will negatively impact the monopoly on money and banking.  Many of them see bitcoin’s price volatility as being the nascent technology’s biggest enemy, but over time volatility will lessen due to its growing market and evoke more confidence.

Bankers do imagine a bitcoin world as a theoretical possibility but I imagine it as a tangible reality that has already taken shape and is forming before our very eyes. It’s only a matter of time before the bankers realize this is the case. These are all developments we have been covering at The Dollar Vigilante (TDV),  and we have much more planned for the future in the cryptocurrency space. 

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