Conducting transactions through the use of virtual currency may somehow be comfortable for an individual, but not so much for the economy, because withdrawing deposits in banks to invest them in these virtual coins would be a real threat to the financial stability of the country. But how? It’s simple. Banks would not have cash, while virtual currencies could make deposits depreciate due to their volatile nature.
This is the conclusion of a recent study of the Bank of Albania regarding the effects of virtual currencies on the economy. Experts of the central bank explain that the effects of the use of virtual currency would be similar to the impact of that the withdrawal of cash from banks had in 2002 or 2009.
“In case of an immediate withdrawal of deposits from the banking system to invest them in Bitcoin, the banking system would face cashflow problems”, they say, adding that this would have a chain effect and banks would be more reluctant to finance the economy.
“Overall, financial indicators would deteriorate as a result of the indirect effect of the deterioration of macro-economic conditions”, they also say. In a way, this may also act as a warning for individuals, as they would be the most affected ones from this scheme, because constant fluctuations in the value of Bitcoin would cause an immediate depreciation of their assets and deposits. “These events would have an indirect effect on financial stability”, the Bank of Albania appeals. According to this institution, the country’s economy will not see anything positive out of the application of the virtual currency, despite the fact that this may interest individuals who would rather remain anonymous when conducting financial transactions.
Bitcoin may depreciate in a matter of minutes, says central bank
It may look as an attractive currency for the moment due to its high value, but people should be careful as Bitcoin may lose its value very quickly. This is another warning coming from the Bank of Albania in relation to the virtual currency. “The immediate growth in demand for Bitcoin leads to drastic price fluctuations. On the other hand, the emergence of similar virtual currencies, may drive the price of Bitcoin down”, experts of the Bank of Albania say.