The adoption of Bitcoin as a national currency by some country could lead to economic collapse, says a former official and now adviser to the Central Bank of China.
Sheng Songcheng, an advisor to the People's Bank of China (PBoC), has rejected digital currencies such as Bitcoin as assets since they lack the value base of a legitimate currency.
In an interview, Sheng further opined that the deflationary nature of digital coins would mean that it would not function well as a currency or medium of exchange in modern economies.
"Bitcoin is a string of code generated through a complex algorithm, and has no inherent value," Sheng said, adding that the virtual nature of digital coins is its most significant feature.
Sheng, general director of the Department of Statistics and Research of the People's Bank of China, holds a doctorate in economics from the Shanghai University of Finance and Economics. He is currently Professor of Economics and Finance at a business school in Shanghai.
Sheng's comments come months after the counting of the country's Bitcoin markets between January and February this year. Regulatory oversight has resulted in a number of significant changes between China's Bitcoin exchanges, including the addition of negotiating commissions, stricter know-your-client (anti-money laundering) rules and restriction Margin or trade based on loans.
Sheng's hardest criticism of digital currencies focuses on their volatility, stating that "fluctuations in their prices can easily reach 10 or 30%."
Meanwhile, the Central Bank of China - which opened its digital currency research institute earlier this month - is making significant efforts to launch its own digital currency. The central bank completed an early test of its digital currency at a Blockchain late last year.
The opinions offered by the former PBoC official are nothing new in the area of criticism of decentralized digital currencies by central bankers in other countries.
Less than a month ago, the head of the German central bank, Jens Wiedmann, said that immediate bank payments would put an end to the interest of most citizens in digital currencies like Bitcoin. For separate reasons, Wiedmann also stated that digital currencies could worsen financial crises in the future.
