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Brazil’s Central Bank chairman says Bitcoin is a Ponzi Scheme

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Ilan Goldfajn, Brazil's Central Bank chairman

One month after the Bank of International Settlements (BIS)  recommended central banks to “think seriously” on their approach to the growing cryptocurrency markets, the head of Brazil’s central bank, Ilan Goldfan, took on Tuesday (Oct.17) a strong position against Bitcoin, which he compared to a Ponzi (pyramid) scheme.

Goldfajn said “the Bitcoin is a financial asset with no ballast that people buy because they believe it will appreciate. That is a typical bubble or pyramid [scheme].”

The BIS – know as the central banks’ central bank – in its latest quarterly report discussed cryptocurrencies  (such as Bitcoin and Ethereum), stating that central banks should consider whether or not to issue their own digital currencies in the future.

“In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen – with ups and downs – from a few cents per coin to over $4,000. In the meantime, hundreds of other cryptocurrencies — equalling bitcoin in market value – have emerged,” the BIS report said.

But central banks, also observed BIS, will have to take into consideration not only consumer preferences for privacy and possible efficiency gains in terms of payments, clearing and settlements “but also the risks it may entail for the financial system and the wider economy, as well as any implications for monetary policy.”

Goldfajn’s  stance is notable since the Brazilian Congress presently debates on rules for cryptocurrency activity in the country.

Ponzi Scheme

Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.