England’s central bank has said that Bitcoin (BTC) could become “worthless” and people investing in cryptocurrencies should be prepared to lose everything.
In a warning over the potential risks for investors, the Bank of England questioned whether there was any inherent value in Bitcoin, the most prominent digital currency, which has soared in value this year as high as $68,000 U.S. a piece.
However, since peaking in November, Bitcoin has suffered a steep selloff after news first broke of the Omicron variant of COVID-19. The digital coin now trades at just over $48,000 U.S.
The market capitalization of cryptocurrency assets has grown tenfold since early 2020 to about $2.6 trillion today, representing about 1% of global financial assets.
The Bank of England estimates that 0.1% of British households’ wealth is in Bitcoin and other cryptocurrency assets such as Ethereum (ETH). The central bank’s financial policy committee, set up in the wake of the 2008 financial crisis to monitor risks, says there is little direct threat to the stability of the British financial system from cryptocurrency assets.
However, the Bank of England warned that, at the current rapid pace of growth, digital assets could become more interconnected with traditional financial services and are likely to pose a number of future risks.
Publishing its regular “health check” on the financial system, the central bank said major institutions should take a cautious approach to adopting cryptocurrency assets and that it would closely monitor developments in the market going forward.
