According to a report by Reuters, on Monday (October 12), Bank of England (BoE) Governor Andrew Bailey commented on Bitcoin’s “intrinsic value” (or lack thereof). However, as far as “extrinsic value” is concerned, Bitcoin is doing just fine.
Here is how Stanford University’s Encyclopedia of Philosophy explains the difference between intrinsic and extrinsic value:
“Intrinsic value has traditionally been thought to lie at the heart of ethics. Philosophers use a number of terms to refer to such value. The intrinsic value of something is said to be the value that that thing has ‘in itself,’ or ‘for its own sake,’ or ‘as such,’ or ‘in its own right.’ Extrinsic value is value that is not intrinsic.”
On March 16, Bailey became the head of the BoE (established in 1694), which is the UK’s central bank.
The Reuters report said that Bailey said during a BoE Q&A session with members of the public:
I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value… It may have extrinsic value in the sense that people want it.”
Apparently, he added that this uncertainty about Bitcoin’s intrinsic value made him “very nervous” about people using Bitcoin as a means of payment.
This was not the first time that the BoE Governor has shown a skeptical stance towards Bitcoin.
“There’s no guarantee of the value of Bitcoin. I’ve said publicly, because we were concerned about it… if you want to buy Bitcoin, be prepared to lose all your money.
“If you want to buy it, fine, but understand that what you’ve got has no intrinsic value. It might have extrinsic value, but it has no intrinsic value… it hasn’t caught on much…”
According to a report by the BBC, on 14 December 2017, when the Bitcoin price was around its all-time high, Bailey, who was the head of the Financial Conduct Authority (FCA) back then, essentially told the BBC in an interview on news and current affairs program Newsnight that investing in Bitcoin was a form of gambling.
These are some of his comments from that interview:
- “It’s not a currency, it’s actually not regulated in its Bitcoin form.”
- “It’s a very volatile commodity in terms of its pricing… We know relatively little about what informs the price of Bitcoin… It’s an odd commodity as well, as the supply is fixed.”
- “If you want to invest in Bitcoin be prepared to lose your money – that would be my serious warning.”
He also pointed out that it was not up to the FCA, but the UK Parliament whether a commodity like Bitcoin should be regulated:
“It would be for Parliament ultimately to make that choice if it wished to do so.
“I don’t press for that providing people understand very clearly this is a very volatile commodity.
“[But] if parliament wants to go further we will happily provide the evidence we have and will support the decision they want to take.”
Bailey also was asked in that interview whether it was appropriate to think of Bitcoin as a currency. He said:
“By adopting the name of cryptocurrency there is a risk that some people regard it as the same as what an economist would call a fiat currency…
“A fiat currency is backed by the state and that’s what preserves the value of the currency through the actions that central banks take.
“Bitcoin is not that – it’s not a currency.”
According to data by CryptoCompare, Bitcoin — the asset that Bailey thinks has very little or no intrinsic value — is currently trading around $11,526, up 2.46% in the past 24-hour period and up 24.78% in the past three-month period:
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.