RBS boss likens bitcoin to Dante’s Inferno as currency tops $15,000

Bitcoin has been likened to Dante’s Inferno by the chairman of Royal Bank of Scotland. As the digital currency surged above $15,000 on Thursday, Sir Howard Davies suggested it should carry a similarly apocalyptic warning for investors.

Davies, a former head of the UK’s top financial watchdog, called on the Bank of England and other authorities around the world to launch a coordinated warning against the digital currency.

Bitcoin has increased in value by $3,500 in the space of a week, after surging more than 900% this year. It was trading at $15,300 at lunchtime on Thursday.

“Put up the sign from Dante’s Inferno – ‘Abandon hope all ye who enter here’ – I think that’s probably what’s needed,” he said speaking on Bloomberg TV, adding that the currency appeared to be a “frothy investment bubble”.

Davies argued for Threadneedle Street to take action at the same time as the US Federal Reserve, Securities and Exchange Commission, and the European Central Bank. “Central banks are very anxious about it [bitcoin],” he added.

The call from the RBS chairman follows warnings from other senior figures in the world of finance, including the heads of Goldman Sachs and JP Morgan, as well as the Nobel prize-winning economist Joseph Stiglitz.

The former Fed chairman Alan Greenspan – who coined the phrase “irrational exuberance” when describing overpriced assets during the dotcom bubble of the 1990s said on CNBC this week that bitcoin is “not a rational currency”.

The Bank of England has made incremental warnings against bitcoin, although Davies said central bankers appeared “nervous about not wanting to be seen to be luddites, saying all of these innovations are bad things”.

Sir Jon Cunliffe, the deputy governor responsible for financial stability, gave brief warnings while speaking to the BBC last week. He said consumers should “do their homework and think carefully” about buying the currency.

Bitcoin is not regulated by the Bank or the Financial Conduct Authority, which has, however, warned investors in initial coin offerings – sales of digital coins or tokens such as bitcoin used by startups as an alternative to raising money by issuing shares – that they can lose all of their money.

However, the UK and other EU governments are taking steps to introduce greater controls, with the Treasury planning to bring cryptocurrencies into line with anti-money laundering and counter-terrorism financial rules.

Still, there have been no public suggestions about giving the FCA or the Bank powers to regulate the new currencies.

Davies’ warning is likely to raise some eyebrows among bitcoin’s supporters, who view the cyrptocurrency as a way of escaping the traditional financial system.

RBS was bailed out by British taxpayers at a cost of £45.5bn after coming unstuck trading risky derivatives and mortgage-backed securities, while remains owned by the government almost a decade later.

But closer scrutiny by financial watchdogs could damage the appeal of bitcoin as a currency free of banks, regulators and governments.

Analysts at Saxobank estimate the it could peak above $60,000 next year, giving the digital currency a total worth of more than $1tn, before crashing to $1,000 by 2019 as regulators introduce greater controls.