Bitcoin could “easily collapse”, said Diane Abbott, the United Kingdom’s Shadow Home Secretary.
In an interview with The House magazine, the Labour MP said that bitcoin is “just a gigantic Ponzi scheme”, stressing the need for the UK to regulate cryptocurrencies.
Labour would regulate Bitcoin
According to the Express, Abbott said that the Labour party would regulate bitcoin if elected.
“We are looking at the Bitcoin issue. One of the problems with Bitcoin is the extent to which it is just a gigantic Ponzi scheme,” the Shadow Home Secretary said.
“And if everyone took their bitcoin money and tried to buy a new car all at once the whole thing would collapse,” she added.
“It was poor regulation of financial services which led to the 2008 crash and obviously regulating bitcoin would be part of that,” she said.
“Generally, we are concerned about sound regulation of financial services.
“I think the people best placed to resolve some of the problems around Bitcoin will actually be people in the Treasury and people in the banking sector but I can’t say more than that.”
Abbott also expressed concerns regarding the use of cryptocurrencies to fund illegal activity.
“We are certainly worried about how in the here and now it is being used to fund terrorist activity and that is something we are looking at.”
Bank of England Governor comment
Her comments come following a speech given by Bank of England governor Mark Carney in which he said that “the time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system.”
Carney said regulation of cryptocurrencies would be a better approach than outright banning them.
“A better path would be to regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system,” he said.
Bitcoins – cryptocurrencies – blockchains
Bitcoin is the world’s most common and oldest cryptocurrency. It has been around since 2009. The second most common cryptocurrency is Ethereum (Ether).
A cryptocurrency is a type of digital currency, i.e., it exists only in electronic form. It has no central bank, unlike fiat currencies. The dollar, pound, yen, yuan, euro, and rupee, for example, are fiat currencies.
Cryptocurrencies use a system of blockchains. A blockchain consists of several blocks. A block is a record, i.e., like a ledger page. Each block contains data regarding all the transactions that have occurred, plus details on the previous block and a timestamp.
Unlike centralized systems, blockchains use distributed ledger technology. In other words, data is not centralized, but is shared across the whole system.