Following Market Crash, BoE Governor Says Crypto Has No Intrinsic Value

While traditional financial institutions gradually embrace Bitcoin, a longtime crypto sceptic, Bank of England Governor Andrew Bailey, has once again reasserted his stance recently, stating that the asset class has “no intrinsic value.”

The governor of the British Central Bank testified in the U.K. Parliament on Monday, the day after lending platform Celsius paused transfers and withdrawals, a move that triggered a market crash on Bitcoin and other cryptocurrencies.

“Crypto-assets have no intrinsic value. This morning we have seen another blow-up in a crypto exchange,” Bailey stated.

Bailey’s comments came after major crypto lending platform Celsius Network decided to halt transfers and withdrawals on Monday, citing extreme market conditions. Celsius, which offers global services to customers worldwide, is headquartered in London, United Kingdom.

The UK-based cryptocurrency lending and borrowing firm stated that the action being taken currently aims to put Celsius in a “better position” to honour withdrawal obligations. However, market participants are concerned with Celsius’ ability to meet its long-term debts and financial obligations.

This is not the first time that Bailey made such sentiments. The U.K. Central Bank governor has never been a fan of cryptocurrency. Last month, the governor said that Bitcoin has no intrinsic value and cryptocurrencies are not suitable as a practical means of payment. His warning came after the crypto market plunged last month, a crash that shed almost $500 billion that month. The market, which fell on May 12, sent Bitcoin price below $26,000 for the first time in 16 months. That marked the first time the crypto sunk below $26,000 since December 26 2020.

The Celsius move further triggered a plunge across cryptocurrencies, with total crypto value falling below $1 trillion for the first time since January 2021 and Bitcoin tumbling below $23,000 per coin.

Central Banks Researching CBDCs

While Bailey admits that blockchain, the underlying technology of cryptocurrencies, is important, he is convinced that Bitcoin is unsuitable as a means of payment. Last month, the governor said that Britain’s Central Bank is researching a launch of its own digital currency.

Most central banks have remained sceptical about cryptos and are taking a cautious approach. They embark on launching their own cryptocurrency, backed by foreign guarantees, rather than trusting some private digital coins.

Many central banks around the globe have been researching the practicalities of creating their own digital currencies. So far, about 10 central banks, including the Bahamas, Nigeria, Cambodia, China, and island nations (Antigua and Barbuda, Grenada, Saint Kitts and Nevis, Saint Lucia, Dominica, and Montserrat) have created their own central bank digital currency. Other 100 nations are actively evaluating central bank digital currencies (CBDCs).

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Bank of England sees CBDCs as a revolution for the future of money

In an event streamed live on Wednesday, Bank of England governor Andrew Bailey and deputy governor for financial stability Sir Jon Cunliffe answer questions from lawmakers from the Economic Affairs Committee. When asked about the growth of innovation surrounding digital currencies in the country, Sir Cunliffe gave the following comment: 

It’s quite difficult to predict how innovators will take money and actually use money going forward. But we are starting to see programmable money being used in the crypto world. And I would expect we would see a similar revolution in the functionality of money driven by technology.

Sir Jon Cunliffe discussing CBDCs | Source:

The Bank of England is currently exploring options to implement a digital pound CBDC for retail payments. A task force behind the CBDC is also investigating the use of a digital pound for distributing payrolls, pensions, etc.

In supporting the initiative, Sir Cunliffe cites the rapidly declining use of cash in the United Kingdom in recent years — which was greatly accelerated by the advent of the COVID-19 pandemic that discouraged physical contact in transactions. An estimated 30% of transactions in the country now occur via e-commerce.

When asked about the potential demand of a digital pound CBDC, Sir Cunliffe said:

“We’ve modeled a very prudent assumption, which is that basically 20% of [household and corporate transactional] deposits based in the banking system could move out of the banking system and into central bank digital money.”

Nevertheless, Sir Cunliffe admitted that the current state of crypto affairs could potentially threaten financial stability within the country. The market cap of cryoptocurrencies has surged to $2.6 trillion in a very short period of time, with an estimated 95% of digital assets being unbanked and 5% consisting of stablecoins. On the opposite side of the Atlantic, the United States has less of a positive outlook on CBDCs, saying that regulated stablecoins designed by the private sector make them redundant.