The general manager of the Bank for International Settlements (BIS) has savaged bitcoin as a "combination of a bubble, a Ponzi scheme and an environmental disaster."
Augustin Carstens questioned Tuesday the sustainability of bitcoin and other cryptocurrencies and suggested authorities had a duty to clamp down on the payment technology.
Sentiment for virtual coins has taken a hammering in 2018 with over $550 billion of value wiped off the entire cryptocurrency market in just under a month. Bitcoin is off around 70 percent from its all-time high in mid-December and its market capitalization has fallen $233.5 billion since then.
In a lecture given in Frankfurt, Germany, Carstens said there were cracks appearing in the "house of bitcoin" as too many copycat currencies had forked off the technology, including bitcoin gold and bitcoin cash. The banker argued this replication could only lead to debasement of cryptocurrencies to the point where they held no economic value at all.
The BIS is known as the "central bank's bank" as that is where the likes of the Federal Reserve and Bank of England hold accounts. Carstens cited trust as another problem for cryptocurrencies as they would never be governed or supported by such institutional infrastructure.
Carstens then called into question bitcoin's efficiency and legality.
"While perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, a Ponzi scheme and an environmental disaster," he said. "The volatility of bitcoin renders it a poor means of payment and a crazy way to store value."
Carstens said the current fascination with cryptocurrencies seemed to have more to do with "speculative mania" and that their only true function appeared to relate to illegal activities.
He said authorities should act to protect consumers and ensure that cryptocurrencies could not be used to evade tax, launder money or finance criminal activities.