Over the past few years, we have seen many different opinions regarding Bitcoin. Some see it as the future of money, whereas others claim it is a pyramid scheme waiting to collapse. Ilan Goldfajn, the president of the Brazilian central bank, has taken a rather aggressive stance on Bitcoin. He recently called the world’s leading cryptocurrency a pyramid scheme, which is rather disturbing.
It is always funny to see how central bankers struggle with the concept of Bitcoin and other cryptocurrencies. In their opinion, anything that isn’t money issued by a central bank is illegal, worthless, and a pyramid scheme. Such comments are always amusing, especially considering that central banks create money out of thin air whenever they want. Such “helicopter money” only serves to further devalue all of the existing bills and coins in circulation.
Brazil’s central bank president, Ilan Goldfajn, isn’t a big fan of Bitcoin and cryptocurrency either right now. This doesn’t come as a big surprise whatsoever. It appears Bitcoin has been gaining a lot of traction in Brazil as of late, although local news outlets still consider it to be a niche market at best. Given the fact that many Brazilians are struggling financially right now, it is no real surprise to see more people flock to Bitcoin there.
Given the Bitcoin price surge we have seen over the past few months, the comments by Goldfajn make even less sense. It is true Bitcoin’s value has appreciated by quite a margin over the past few months, although that doesn’t make it a pyramid scheme by default. Unlike pyramid schemes, there is no incentive for people to refer others as a way to make more money through Bitcoin.
The goal with any financial instrument is to get in early and hope the value appreciates over time as it becomes more popular. This is how the stock market works as well, yet the Brazilian central bank doesn’t consider that a pyramid scheme right now. It is true Bitcoin isn’t issued or controlled by a central bank, but that is one of its main strengths rather than a weakness right now.
We have seen similar comments from other central bankers in the past few weeks. Jamie Dixon was the first to make such ludicrous statements, which resulted in a new all-time high price for Bitcoin. Pyramid schemes are indeed present in cryptocurrency, as is evidenced by projects such as OneCoin and a few others which share similar aspects. In contrast, Bitcoin and most top alternative cryptocurrencies have no pyramid scheme aspects to them whatsoever. The only people who think they do seemingly want to manipulate the Bitcoin price.
In the end, all Banco Central do Brasil can do is warn its citizens about cryptocurrency and the fact that it is not a regulated industry right now. The bank is not actually forbidding Bitcoin, mind you, as the government is working on crafting official regulation for this new form of money as we speak. It will be interesting to see what the future holds for Bitcoin and cryptocurrency in Brazil. The fun part about Bitcoin is how it doesn’t need anyone’s approval to be successful.
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