Investors should be aware of the risks coming from the rapid rise within the cost of digital currency Bitcoin, a Bank of England deputy governor has warned.
Bitcoin’s value passed a record $11,000 (£8,0) on Wednesday after a sharp however often volatile rise This particular year.
Sir Jon Cunliffe, the Bank’s deputy for financial stability, said of which when prices grow so fast, “investors should do their homework as well as think carefully”.
however he added of which Bitcoin’s rise was not big enough to unsettle the economy.
Unlike traditional currencies, Bitcoin is actually not issued by a central bank or government.
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Bitcoin hit a high of $11,377 on one major exchange on Wednesday, an increase of more than 1,000% coming from the start of the year.
The digital currency – which works like virtual tokens – has fluctuated wildly since This particular was launched in 2009.
Critics have said This particular is actually going through a bubble similar to the dot com boom, whereas others say This particular is actually rising in cost because This particular is actually crossing into the financial mainstream.
Asked about the surge, Sir Jon told the BBC: “People need to be clear This particular is actually not an official currency. No central bank stands behind This particular, no government stands behind This particular.”
He said This particular was “closer to a commodity” than a currency, with people choosing to invest as well as trade in This particular.
Bitcoins are created through a complex process known as mining, as well as then monitored by a network of computers across the earth.
A steady stream of about 3,0 completely new bitcoins are created a day – with about 16.5 million currently in circulation coming from a maximum limit of 21 million.
Despite its cost rise, Sir Jon said Bitcoin was “not of a size of which would certainly be a threat to financial stability” or a risk to the UK economy.
Financial regulators have taken a range of views on the status of digital currencies as well as their risks.
US regulators have moved towards treating some of them as currencies, whereas Korean regulators see them as commodities.
The UK’s Financial Conduct Authority warned investors in September they could lose all their money if they buy digital currencies issued by firms, known as “initial coin offerings”.