I am belatedly reacting to comments by the governor of the Bank of England Andrew Bailey (FT.com, May 7), who said that cryptocurrencies “have no intrinsic value” and people who invest in them should be prepared to lose all their money.
My comments have also been spurred by the opinion piece by Roger Svensson “Bitcoin lacks solid footing as an international currency” (June 8).
It can be argued that no money has “intrinsic value” since the abandoning of the gold standard system in the seventies. Fiat money is based on the faith which governments inspire. Governments stand behind fiat currencies, but the faith they inspire can only go so far. It is a fact that money creation nowadays is performed mostly by private banks, when they make loans.
Consequently, central banks don’t control the amount of money in circulation. The debasement of fiat currencies is a fact of life.
The great advantage that I perceive for cryptocurrencies as a store of value is that from the onset they can be issued only in a limited amount, which is established once and for all.
Former Uruguay Ambassador to The Netherlands and Saudi Arabia Algarve, Portugal