Former Federal Reserve Chairman Alan Greenspan said Bitcoin is a bubble after it surged 89-fold in a year and that the virtual money isn’t currency.
“It’s a bubble,” Greenspan, 87, said Wednesday in a Bloomberg Television interview from Washington. “It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”
Bitcoins, which exist as software and aren’t regulated by any country or banking authority, surged to a record $1,124.76 on Nov. 30. The currency has rallied on growing interest from investors, while merchants are starting to accept Bitcoins and U.S. officials have told lawmakers such payments could be a legitimate means of exchange.
“I do not understand where the backing of Bitcoin is coming from,” the former Fed chief said. “There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”
There are about 12 million Bitcoins in circulation, according to Bitcoincharts, a website that tracks activity across various exchanges. Bitcoin was introduced in 2008 by a programmer or group of programmers going under the name of Satoshi Nakamoto.
A Justice Department official said Nov. 18 Bitcoins can be “legal means of exchange” at a U.S. Senate committee hearing, boosting prospects for wider acceptance of the virtual currency.
“We all recognize that virtual currencies, in and of themselves, are not illegal,” Mythili Raman, acting assistant attorney general at the department’s criminal division, told the Committee on Homeland Security and Governmental Affairs.
Fed Chairman Ben S. Bernanke told the Senate committee the U.S. central bank has no plans to regulate the currency.
“Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market,” Bernanke wrote.