In the latest swipe at bitcoin's credibility from a prominent member of the global financial and economic establishment, World Bank Group President Jim Yong Kim said Wednesday at a dinner in Washington that "the vast majority of cryptocurrencies" are essentially "Ponzi schemes", Bloomberg reported.
The plunge in the valuation of bitcoin and most of the hundreds of other digital tokens that were inspired by the virtual currency has appeared to validate criticisms from financial luminaries like Bridgewater's Ray Dalio, who famously called it a bubble late last year. He was one-upped this past week by NYU Economist Nouriel Roubini, who claimed that bitcoin is quite possibly "the biggest bubble of all time".
“In terms of using Bitcoin or some of the cryptocurrencies, we are also looking at it, but I’m told the vast majority of cryptocurrencies are basically Ponzi schemes,” World Bank Group President Jim Yong Kim said Wednesday at an event in Washington. “It’s still not really clear how it’s going to work.”
The development lender is “looking really carefully” at blockchain technology, a platform that uses so-called distributed ledgers to allow digital assets to be traded securely. There’s hope the technology could be used in developing countries to “follow the money more effectively” and reduce corruption, Kim said.
Crypto traders appeared to shrug off Kim's comments as valuations climbed Thursday, erasing some of the precipitous selloff that has sent the price of a single bitcoin down more than 60% since its late-2017 peak.
While cryptocurrency technology has the potential to reshape global finance, concerns have been raised about its volatility and the potential for money laundering or other crimes.
Earlier this week, Bank of International Settlements chief Agustin Carstens - the former Governor of the Bank of Mexico - said there’s a “strong case” for authorities to rein in digital currencies because their links to the established financial system could cause disruptions. The desire to protect against this significant, undiversified risk is why credit-card lenders including Capital One, Bank of America, JP Morgan Chase & Co. and others prohibiting users from buying virtual currencies with their credit cards
Federal Reserve Chair Jerome Powell recently said that “governance and risk management will be critical” for cryptocurrencies. Yesterday, the heads of the SEC and CFTC appeared before the Senate Banking Committee to talk about the bitcoin and digital-token ecosystem, and their plans for overseeing a market that has been criticized for being rampant with fraud and abuse.