Bitcoin is the “child of the great quantitative easing” by the likes of the Bank of England, the former Conservative Party Treasurer has claimed.
Lord Michael Spence blamed the vast programme of bond buying carried out by central banks for creating a price bubble for cryptocurrencies such as bitcoin, saying the Bank of England “printed too much money” and caused a “very rapid growth in the money supply”.
Cheap money inflated the cryptocurrency market into the “modern day equivalent of the Dutch tulip bubble”, said Lord Spencer, the founder of trading firm ICAP.
The Dutch tulip bubble was an early example of an investment bubble, where the cost of flower bulbs in the Netherlands in the 17th Century exploded before crashing.
“My feeling is bitcoin is a child of the great quantitative easing,” Lord Spencer said at an Centre for Policy Studies event on the fringes of the Conservative Party conference.
However, he praised regulators for quickly clamping down on the cryptocurrency market amid concerns it has become a wild west that risks hurting ordinary investors. America's Securities and Exchange Commission (SEC) this week fined Kim Kardashian for promoting a cryptocurrency on social media in a high-profile example of the global crackdown.
Quantitative easing – the Bank’s huge bond-buying programme aimed at helping to prop up the economy – has been blamed for inflating an array of investments from stocks to house prices.
The Bank of England built up a huge balance sheet of £895bn of bonds after sweeping up government and corporate debt under quantitative easing.
A number of senior Tory figures have blamed QE for stoking inflation, heightening concerns about the Bank of England’s independence as it tackles rapid price rises.
At the same event, Lord Spencer warned that stamp duty on share trading is holding back the London stock market.
The former Tory Party treasurer, who held the position from 2006 to 2010, warned that taxes on share trading are denting Britain’s chances of securing star listings. There are concerns that the UK is missing out on high-profile listings and looks set to lose the IPO of British chipmaker Arm, which was listed in London until its takeover in 2016.
There has been a drought of new listings on the London market this year, with the amount raised through floats at its lowest levels since 2009. A string of takeovers have also hollowed out the market, sparking concerns about its long-term health.