The National Australia Bank has warned the digital currency craze could destabilise the Australian economy and put Australians at risk of unemployment and even inflation.
NAB chief economist Paul Kelly says the global economic landscape is ripe for a cryptocurrency boom, with bitcoin and other cryptocurrencies increasingly used as a means to fund illicit activities and evade taxes.
But the central bank says the risk is much greater than just the digital money itself.
“It is not just about bitcoin,” he said.
It is that we have these kinds of things like online casinos, you know, gambling sites, where you’re gambling on people’s money, so you’re putting all these risks on top of the fact that people are actually buying and selling virtual currencies that are now being used as sort of a way to fund illegal activities.
“Mr Kelly says bitcoin is still at the nascent stage of development and many Australians are unaware of its value and risks.
He says the digital currencies could be a new type of currency to use and people are starting to learn about the risks.”
He said the risk of a digital currency crash was “greater than the value” of the virtual currency itself.””
[But] there are a lot of people who are actually using bitcoin to buy things online and the value is rising rapidly and it’s going to continue to rise.”
He said the risk of a digital currency crash was “greater than the value” of the virtual currency itself.
“It’s just a matter of time before we get a lot more of this sort of behaviour,” he says.
A recent study by economists at the Australian National University found the value for Australian dollar was increasing by an average of $3.6 billion per day in the last three months, while bitcoin was trading at just $7.5 million.
The NAB says the increase in the value and the volatility of digital currency is also a significant risk for the Australian financial system.
Key points: The bank warns the risks are greater than the digital cash itself.
Mr Kelly says digital currencies are still at an early stage of economic development and are still being used to fund crime.
Mr Pinto said the risks of virtual currencies are so great that they could lead to a virtual crash and a banking crisis.
And he warned that a digital bubble could burst if investors do not adjust quickly.
“If it continues to grow, then it could even cause a financial crisis,” he warns.
What are virtual currencies?
Virtual currencies are digital digital tokens that are traded on the internet for a small amount of bitcoin, which is essentially a virtual coin.
They can be used as payment for online services like gaming sites, online shopping, payments, remittances and even to fund terrorist activity.
While virtual currencies exist today, they have been around since 2009.
In the US, virtual currencies were first used to pay for the Silk Road online black market, which was used by drug dealers and users to buy drugs and other illegal goods.
Some virtual currencies have been banned in some countries such as China, which in 2016 announced it would restrict the use of virtual currency in all transactions.
Many virtual currencies can be transferred internationally using virtual debit cards and bank transfers.
For more on digital currencies, check out our new Digital currency news guide.