Bank of England Governor Andrew Bailey has expressed concern about Salvador’s acceptance of Bitcoin (BTC) as legal tender after President Neb Bukele announced the launch of Bitcoin City.
Bailey argued that El Salvador’s decision to use bitcoin as a currency is alarming because consumers are likely to be affected by the cryptocurrency’s extreme volatility.
Trading around $43,000 on the first day Bitcoin was accepted as legal tender in El Salvador, Bitcoin soared to a new all-time high on November 9, surpassing $68,000. The price of BTC has dropped significantly since then, with Bitcoin trading at $54,626 at the time of writing.
Bitcoin 90 day price chart. Source: CoinGecko
I am worried that the country will choose it as its national currency, Bailey said during a speech at the University of Cambridge Students’ Union.
The governor also asked if Salvadorans understand the nature and instability of bitcoin, which is his main concern.
Bailey also cited a new statement on El Salvador from the International Monetary Fund (IMF), which is responsible for tracking risks to the world’s financial systems. A statement issued on Monday highlighted the “significant risks” associated with the use of bitcoin as legal tender and the trading of bitcoin in El Salvador.
The International Monetary Fund previously issued a warning against El Salvador’s bitcoin law in June, which did not prevent the country from adopting and accepting BTC as legal tender in September. Bailey added that the Bank of England is exploring the possibility of launching a central bank digital currency (CBDC), and stated:
These are strong arguments in favor of digital currencies, but in our opinion, they should be stable, especially if they are used for payments. This does not apply to cryptocurrencies. ”
Related: El Salvador Dollar Debt Indulges in Bitcoin Bond Schemes
The news came shortly after the Bank of England’s Deputy Governor for Financial Stability, Sir John Cunliffe, announced that the central bank’s digital currency is a “revolution in technology-driven money functions”. On the other hand, according to a survey conducted by Redfield & Wilton Strategies in August, the majority of the British adult population was skeptical about the possibility of CBDC adoption.