On July 19, governor of the Austrian Central Bank (German: Oesterreichische Nationalbank) Ewald Nowotny warned against cryptocurrency usage in an interview with newspaper Kleine Zeitung. Nowotny worries that the general public fails to grasp the potential psycho-social ramifications of a virtual currency correction. When asked about Japan’s recognition of bitcoin as a means of payment, Nowotny expressed his reservations.
“Bitcoin is not a currency,” he said. “Bitcoin lacks the one thing that makes a good currency, namely stability.” Instead, he classifies bitcoin as “an object of speculation.”
His hesitation is understandable, especially in light of bitcoin’s impending User Activated Soft Fork. Nonetheless, cryptocurrency has taken root in Austria. Österreichische Post, Austria’s official postal services provider, recently announced its partnership with a Vienna startup to allow the exchange of euros for bitcoin.
Significantly, Nowotny is not completely pessimistic about cryptocurrency. He explains that Austria does “not ban it as a banknote,” but acknowledges that “you have to let the people know what they are doing.” Previously, he had compared cryptocurrency’s popularity to the Tulip Craze of the 17th century Holland.
Nowotny’s measured approach is exactly what a concerned public would hope for in a central banker. He recognizes the inherent dangers and seeks to insulate the Austrian economy.
“[Bubbles] can have negative psychological effects,” he said. “This is the danger we see – but I would not overrate it either.”
As a member of the European Central Bank’s governing council, Nowotny may inform the approach of his colleagues. In May, ECB president Mario Draghi encouraged the close study of distributed ledger technology.
Quotes translated from German using Google Translate.