Roubini launches stinging attack on bitcoin
Economist Nouriel Roubini, renowned for his bearish thoughts on financial markets, appears to be equally pessimistic on the fledgling virtual currency bitcoin , declaring it a "Ponzi scheme" and a "lousy" store of value.
Bitcoin - a "virtual" currency that allows users to exchange online credits for goods and services - has received criticism and praise in equal measures since appearing in the spotlight back in April last year. Seen as a libertarian movement with no central bank, the price rallied to well over $1,000 last November before regulatory moves in China and problems at major exchange Mt.Gox curbed investor appetite.
Whilst there are many high-profile advocates - including entrepreneur Richard Branson and the Winklevoss twins - its appears Nouriel Roubini, the bearish economist known as "Dr. Doom" is not one of them, using his Twitter account Sunday to list its many faults.
(Read more: How to make money from bitcoin)
"Bitcoin isn't a currency," he said. "It is (by the way) a Ponzi game and a conduit for criminal/illegal activities. And it isn't safe given hacking of it."
Bitcoins are not a unit of account, a currency, a means of payment or even a store of value, according to Roubini. He said that no goods and services were being priced in the cryptocurrency and suggested that there never would be. He added that it was a "lousy" store of value as there was "little wealth" in bitcoin, had no assets priced in it and had major price fluctuations and volatility. The price of bitcoin has lost half of its value since November and wild price fluctuations of around 50 percent in one day are not uncommon.
(Read more: Japan to regulate and tax Bitcoin trades: Nikkei )
"(Bitcoin) bugs like gold bugs are fanatics who speak of (bitcoin) in cult-like religious ways. Like gold bugs they have paranoid conspiracy views on the dollar," he said in another Twitter update on Sunday evening.
Advocates would disagree with Roubini, but even the most hardened of fans still accept that more needs to be done with this new technology. Peter Vessenes, the chairman of the Bitcoin Foundation, which is an organization set up to promote the digital currency, believes that bitcoin is truly "disruptive" and "engaging" but also warns of risks assocated with the currency.
"There are botnet operators, hackers, and Ponzi-scheme runners floating around our space," Vessenes states on the foundation's website.
Bitcoin regulation has been a hot topic since its price started to rise at the beginning of 2013. Subpoenas have been sent to several companies associated with bitcoin over the last year, sites have been shut down and arrests have even been made at some exchanges. However, it also received favorable comments by regulatory officials at a U.S. Senate hearing in November and former Federal Reserve Vice Chairman Alan Blinder has been quoted as saying that the cryptocurrency shows "promise".
(Read more: Another bitcoin site bites the dust )
Japan last week deemed the digital cash to be more of a commodity than a currency and Thailand has moved to ban the digital currency altogether. German authorities have said it can be classed as a unit of account akin to "private money" whilst U.K. officials are busy stripping away taxes associated with the new technology.
Away from the regulatory issues, bitcoin offers a marketing tool for some companies. Billionaire entrepreneur Richard Branson announced that his commercial spaceflight venture would accept bitcoin as payment. Meanwhile a university in Cyprus, a sustainable grocer, a travel website, a delicatessen and a guitar repair shop are just some of the smaller businesses that have received attention online thanks to their decisions to accept the cryptocurrency.
Despite this, Roubini remains unconvinced of bitcoin's merits for retailers. He deemed that it would only benefit criminal activities and said those that do accept it would immediately convert it right back into a fiat currency like the U.S. dollar. "Bitcoin price volatility implies huge market risk," he said.
-By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81.
