If the shaky state of the current central banking systems throughout the world wasn’t already obvious, the fact that virtual currencies are worrying central bankers is further highlighting the weakness of most modern financial systems.
Bitcoin, a virtual currency issued by a decentralized network of computers, has more than doubled in value to $16.37. As the currency keeps gaining in popularity, government officials and economists throughout the world worry that the online currency could undermine the ability of central banks to manipulate the economy.
Bitcoin, unlike central banking systems, relies solely on supply and demand. The decentralized and unregulated currency exchange operates solely on the principles of the free market, unlike government banking schemes which rely on the force of the state to manipulate money supply.
In Europe, where the economy continues to falter, the central bank has rallied against Bitcoin.
Steve Hanke, a professor at Johns Hopkins University in Baltimore, told Bloomberg: “I think the ECB obviously is concerned, and it’s not reputational. I think it’s a competitive threat. Maybe virtual currencies will be so convenient that they will pose a threat because of their ease of use.”
Bitcoin has also gained popularity in some unexpected parts of the world. It has been reported that some people in Iran have begun using the currency exchange because of economic troubles brought on by U.N. sanctions.