Bank of Japan Governor: Bitcoin is Too Unreliable to be a Currency

Governor of the Bank of Japan Haruhiko Kuroda has cast doubts on bitcoin's future as a currency.

"Without safety or stability in its value, there would be no demand. In that sense, it cannot be a currency," he told reporters after a central bank policy meeting.

Kuroda added:

"It is not a currency, and I don't think it is a general means of settlement,"

Kuroda's comments, which were reported in the The Economic Times, come after nationwide shock in Japan at the bankruptcy of the now-infamous exchange, Mt. Gox, which was based in Tokyo, and other recent bad news for bitcoin, such as possible fraudulent activity at Cyprus-based Neo & Bee.

The central bank chief's mention of stability also indicates that the perceived volatility of bitcoin is an issue of concern.

After a tremendous price spike to over $1,100 late in 2013, the value of bitcoin has since dropped, often fluctuating strongly at news reports or even rumours, and currently stands at around $450 on the CoinDesk Bitcoin Price Index.

In time, bitcoin's volatility is likely to diminish as more merchants start accepting payments in the digital currency and it becomes less a store of value for flighty investors and more a means of buying and selling products or services.

Mt. Gox shock

When the oldest and biggest bitcoin exchange of them all, Mt. Gox imploded in spectacular fashion in late February, citing the loss by theft of 750,000 of its customers’ bitcoins, it took the nation by surprise.

The institutions of government had seemingly little knowledge of bitcoin and how to deal with the bitcoin business that had brought such unwelcome attention to the country's capital.

Initially, the government seemed unsure whether it should act on the failure of Mt. Gox CEO Mark Karpeles to keep his customers funds safe from hackers, before finally investigating the affair.

Further, consideration caused Japan’s senior regulators to call for international regulation on bitcoin, with the Senior Vice Finance Minister Jiro Aichihttp://www.kantei.go.jp/foreign/96_abe/meibo/fukudaijin/index_e.html stating: “If we regulate [bitcoin], international collaboration would be necessary” to prevent criminals from exploiting loopholes or weak points in international law.

Later, perhaps feeling the pressure of the international media spotlight over Mt. Gox, the country's ruling party, the Liberal Democratic Party (LDP) – while saying that bitcoin was not a currency – launched an investigative committee into bitcoin, and blocked banks from “brokering bitcoin transactions or opening accounts holding the virtual unit”.

The latest comments from the Bank of Japan head seem a more considered response, although not entirely positive for bitcoin as a whole.

Haruhiko Kuroda image via Wikipedia / Akira Kouchiyama