Buying bitcoin carries a similar level of risk to gambling and people who invest in it should be ready to “lose all their money” according to the head of one of Britain’s leading financial regulators.
Andrew Bailey, CEO of the Financial Conduct Authority and a former executive director at the Bank of England, issued a warning to prospective investors in an interview on the BBC show Newsnight.
“If you want to invest in Bitcoin be prepared to lose your money,” Bailey said, “that would be my serious warning.”
Bitcoin is sometimes seen as being similar to government issued — or fiat — currencies such as dollars and euros. But the cryptocurrency is actually a commodity, and as such it behaves very differently, Bailey stressed. Unlike fiat currency, bitcoin’s value is not backed by a state or preserved by their central banks.
“It’s not a currency, it’s actually not regulated in its Bitcoin form,” Bailey said. “It’s a very volatile commodity in terms of its pricing.”
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Bailey denied that financial regulators had been left behind by cryptocurrencies’ rapid ascent, and said that the decision on whether to regulate them should be left to governments.
“I don’t press for that providing people understand very clearly this is a very volatile commodity,” Bailey said, “[But] if parliament wants to go further we will happily provide the evidence we have and will support the decision they want to take.”
The value of Bitcoin has skyrocketed this year leading to an investment scramble the head of Australia’s central bank Philip Lowe has described as “speculative mania.” On Dec. 12, 2016 bitcoin was trading at $780; one year later it had breached the $17,000 mark.