The value of Bitcoin, a virtual currency, has swung drastically and ruined its efficacy as means of exchange compared with more stable currencies such as the US dollar, said David Andolfatto of St. Louis Federal Reserve.
Authorities are on a global scale pondering how to regulate digital currencies such as the Bitcoin, which is not issued by any central authority. Chair of the Federal Reserve Janet Yellen told Congress that the central bank lacked legal authority to come up with Bitcoin regulations.
“You don’t want that in a monetary instrument. A good money should maintain a stable purchasing power over short periods of time,” Andolfatto said about what he referred to as Bitcoin’s “Wild” swings, according to Bloomberg.
The Fed economist was speaking in a presentation in St. Louis.
Already, analysts consider the classification of Bitcoin as property as opposed to money by the US Internal Revenue Service as yet another blow in a string of bad news for the currency.
Yahoo quoted Gina Sanchez, founder of Chantico Global, as having said that the IRS classification of Bitcoin meant that its users had to keep track of their capital gains every time they made transaction in the currency.
The CNBC contributor added that he saw no valid reasons for investors to exchange their dollars for Bitcoins. She said that Bitcoin never made sense no matter attempts by “cyber geeks” to present it as a “monetary authority.
Retailers in a wide array of fields are increasingly accepting Bitcoin payments or transactions but recent events have highlighted concerns about the currency’s feasibility. Authorities in China, India and Russia have attempted to outlaw Bitcoin dealings of any sort or at least certain forms of Bitcoin transactions.
The biggest Bitcoin in the world, Mt. Gox sought bankruptcy protection in February in Tokyo.
But Andolfatto said digital currencies could still provide cheaper options of electronic money transfer.
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