Bank of Thailand governor Veerathai Santiprabhob raised the warning flag on cryptocurrencies, saying they are not legal tender, although regulation is not needed as only a handful of people use them.
Some people believe digital currencies are legal tender, but no central bank in the world accepts them, he said. Central banks in the US and Japan are open to opportunities for virtual currencies to be used for payments if recipients are ready to accept them.
Mr Veerathai joined central banks worldwide in issuing a warning against cryptocurrencies after bitcoin set a new record of US$19,666 on Sunday on the Luxembourg-based Bitstamp exchange. Bitcoin's price has surged more than 1,700% this year.
Singapore's central bank on Tuesday also issued a warning against investing in cryptocurrencies, saying it considers bitcoin's recent price surge to be driven by speculation, putting investors at risk, according to Reuters.
Cryptocurrencies are a digital commodity rather than a digital currency, the central bank chief said.
"Cryptocurrencies are like commodities, with prices spiking substantially. For example, the gold price once hit US$1,900 per ounce and its price now stands at $1,200. The oil price rocketed to more than $100 a barrel and plummeted to below $30 before settling at $60. Those who want to invest in cryptocurrencies must understand its risks and returns, and how much risk they can take on," he said.
Mr Veerathai said people uneducated in the use of cryptocurrencies might ultimately be investing in a Ponzi scheme. But he said the central bank has not regulated cryptocurrencies as their usage is not so ubiquitous that they can cause systematic risks.
Regarding cryptocurrencies' illicit use, he said the Bank of Thailand does not take responsibility for money laundering and it needs the Anti-Money Laundering Office to monitor that issue. At present, there are over 1,300 cryptocurrencies worldwide, with bitcoin being the most well-known.
Charl Kengchon, managing director of Kasikorn Research Center, reiterated that cryptocurrencies are not legal tender operating under the country's financial regulators.
"Cryptocurrencies have nothing to do with any business activity or the economy, making them different than other legal financial assets. So, [bitcoin's] price surge is largely due to speculation, creating risks for players," he said.
