Swedish Central Bank Governor: Bitcoin is highly volatile and lacks regulation, so investors should be careful

Stefan Ingves, chairman of the Basel Committee for Global Regulators and governor of the Swedish Central Bank, said: "The current outlook for investing in Bitcoin is very dangerous. If you look back at what happened in the last century, when things like tulips or other similar things reached this height, what was the chance that it could continue? This is probably going to disappoint those who still have illusions about it."

When asked whether cryptocurrencies such as Bitcoin raise questions about financial stability, Stefan Ingves told CNBC: "I think it's wrong to call it a cryptocurrency, it's an encrypted thing, but it's definitely not a cryptocurrency."

Stefan Ingves believes that investing in Bitcoin and other similar digital currencies is very dangerous. He urged traders to be cautious because of the high volatility of the market and the lack of support from central banks or international regulators.

Bitcoin was trading around $16,029 on Friday morning, according to industry website CoinDesk, after days of wild price swings that saw it surge above $19,000 on Coinbase on Thursday before a sharp drop.

Bitcoin prices on Coinbase, one of the major cryptocurrency exchanges that accounts for a third of Bitcoin trading volume, are often higher than on other platforms.

“If people could look at what happened in the past and realise that the only thing that could have gone to this level was tulips, they would naturally oppose those who still insist on doing so,” said Stefan Ingves.

Tulip Mania

Stefan Ingves is not the first to compare Bitcoin’s meteoric rise to the tulip mania, which is widely considered to be a financial bubble.

In the 17th century, tulips became a precious commodity, traded on the Dutch stock exchange. By the time many people sold their other possessions to get involved, it was all over. The sudden drop in prices triggered panic selling, and the price of tulips quickly fell to the bottom, trapping many investors.

Bitcoin’s market capitalization has surged in recent days, surpassing $250 billion, which means it’s comparable to the market capitalization of the 20 largest stocks in the S&P 500.

Old-fashioned banking

Meanwhile, on Thursday, financial regulators reached a long-standing agreement to coordinate the global banking industry. The Basel Committee, made up of banking regulators from the world's top financial centers, adopted new regulatory rules to help banks in the aftermath of the financial crisis. The rules are designed to ensure that banks around the world maintain consistent levels of managed capital and the metrics they use to assess their risk.

"International regulators have a 'very high awareness' of developments in the financial technology sector, but it is too early to talk about a 'regulatory framework'," said Stefan Ingves.

“I would also like to stress that sometimes when people talk about fintech, there is some hype and they think that old-fashioned banking will disappear. But I don’t think that will happen because regardless of what the existing technology is, in most countries our banks are hundreds of years old and there is a good chance that it will continue to be that way,” he added.