Saudi Arabian Banker and Member of Saudi Financial Association warns against Bitcoin
After the surge of Bitcoin to more than $35,000 in the month of January of 2021, Arab News met with former Saudi Banker and member of the Saudi Financial Association Fadhel Al Buainain, who told them that Bitcoin is a first-class speculation tool without any support from cash reserves or economic superpowers, in contrast to the valuation mechanism of currencies like the dollar, the euro and others.
Bitcoin started, he noted, as an instrument for the movement of money denominated in US dollars and away from the conventional banking system, but soon transformed into an independent digital currency that is valued purely on the basis of supply and demand. “The risks involved with Bitcoin are major and significant,” he said, adding: “The first risk is that nobody knows how it started and where it gets its strength. Another risk is that it is not tied to any central bank or a financial institution that guarantees it. Besides, most of the banks do not approve it.
He added that the biggest issue with Bitcoin is the fact it has been used as a money laundering tool by those involved in the drug trade and other illegal activities. “This makes it a suspicious currency from a legal perspective,”
Some analysts have speculated that Bitcoin could rise all the way to $100,000. Bitcoin has taken advantage of this optimism, especially among traders looking for a get-rich-quick scheme, leading to the potential for a bubble.
“I don’t think the Bitcoin legislation is effective because it is not associated with any reliable bank. Therefore, everything that is said about its legislation is inaccurate and impractical,” Al-Buainain said.The banker said there is a place for digital currencies, but only if their valuation is determined by central banks.
Financial analyst, Mohammed Al-Suwayed, believes that while Bitcoin may rise as high as $100,000, the market was easily manipulated. Bitcoin is gaining now, he added, because of the liquidity available to speculators in the stock market. But he assessed that the speculation could end at any moment, causing the valuation to plummet, as has been seen before.
The Saudi Central Bank’s Standing Committee for Awareness on Dealing in Unauthorized Securities in the Foreign Exchange Market has previously warned against trading in unlicensed forex currency exchange markets.
The committee said investing in digital currencies is a high-risk strategy due to the fluctuation of prices and Bitcoin not being subject to the Saudi banking regulatory authorities.