Cryptocurrencies may not be „sufficiently integrated” into the rest of the financial system to pose an “immediate systemic risk,” said Jon Cunliffe, the Bank of England’s Deputy Governor for financial stability. He added, “I suspect the boundaries between the crypto world and the traditional financial system would become increasingly blurred. Finance has inherent risks, and while technology can change the way risks are managed and allocated, it cannot eliminate them.”
“Financial assets with no intrinsic value … are only worth what the next buyer will pay. They are therefore inherently volatile, highly vulnerable to sentiment and prone to collapse,” Mr. Cunliffe said at the British High Commissioner’s headquarters in Singapore. For example, the most traded virtual currency Bitcoin’s (BTC) exchange value has fallen sharply against the US dollar (USD) and is still oscillating around US$ 20,000 per BTC. On 15 July 2022, at 8:00 am CET, it traded at US$ 20,660.00 per BTC with the daily strengthening of the BTC by +0.34% against the USD. Meanwhile the global currency pair EUR/USD was trading at US$ 1.0015 per EUR, with a daily decrease of EUR -0.01% against USD.
Bitcoin is an internet open-source P2P payment network and also the cryptocurrency used in this network. Bitcoin’s main uniqueness is its full decentralization; it is designed so that no one, including the author or other individuals, groups or governments, can influence the currency, falsify, confiscate accounts, control cash flows or cause inflation. There is no central point in the network, and no one can make decisions. The final amount of bitcoins is known in advance and the release of bitcoins into circulation is defined in the network source code. There are minimal or no cost payments. The network has been operating since 2009 and it was created by a group of people known as Satoshi Nakamoto. According to cryptocurrency analysts Bitcoin is the only medium of exchange that can offset central banks printing money.
A special database that stores an ever-increasing number of data – called a blockchain – serves as bitcoin’s ledger. The online database is protected both against unauthorized outside interference and from the users themselves. The final amount of bitcoins is known in advance and their release into circulation is defined in its source code. A unique feature of bitcoin is its complete decentralization. It is designed so that no one, not even its author or other individuals, groups or governments, can influence, counterfeit, confiscate accounts, control cash flows or cause inflation. Bitcoin is completely independent of traditional currencies, its value depends on the confidence that it will be possible to pay with it in the future as it does today. The value of bitcoin is based purely on supply and demand on the market, in short-term sections the exchange rate is characterized by sharp price fluctuations.
