Bitcoin punters cannot rely on a bailout, experts warn

A growing number of City voices are calling on the government to issue clear warnings about Bitcoin and to alert people that there will be no bank-style bailout if the bubble bursts.

Amid reports in American that some are re-mortgaging homes to speculate on the relentless rise of the crypto-currency, some in the Square Mile say ministers need to intervene.

Yesterday bitcoin futures started trading in Chicago, a move that seemed to give the digital currency some legitimacy. It surged more than 20%.

Today it was up again, a more muted $600, to just over $17,000.

John Chatfield Roberts, a veteran fund manager with Jupiter, said: "Bitcoin and other crypto-currencies are a bubble on a par with tulips and the South Sea Bubble. The regulators must make it abundantly clear to the public that if they choose to speculate in these things they will almost certainly lose money eventually and they will NOT be bailed out."

Alan Miller at SCM Direct said: “Whilst Caveat Emptor, let the buyer beware, applies to bitcoin, it should not stop the UK Government reminding regulators of their responsibilities to protect the public by discouraging speculation. This might take the form of extra paperwork requiring individuals to acknowledge the high speculative risks in such investments and restrictions on any leveraged investment in bitcoin.”

The Bank of England and the Financial Conduct Authority say they do not regulate bitcoin, but point out they have made firm statements on the issue.

Jon Cunliffe, deputy governor at the Bank has said: “People need to be clear this is not an official currency. No central bank stands behind it, no government stands behind it."

The Financial Conduct Authority has told bitcoin punters that they are “extremely unlikely to have access to UK regulatory protections like the Financial Services Compensation Scheme or the Financial Ombudsman Service”.

Neil Wilson at ETX Capital said: “The regulator needs to make clear that unlike bank deposits, funds ‘invested’ in Bitcoin wallets are not protected by the FSCS. There will be no Bitcoin bailout if it all goes up in smoke.”

Analysts at Deutsche Bank on Tuesday issued a note listing 30 risks to the stock market in 2018. A bitcoin crash came in at number 13.

Some fans of bitcoin claim it could replace gold as a store of value.

Goldman Sachs analysts said in a report today that there has "been no discernible outflow" from gold.

The report says: "With Bitcoin on an explosive upward trajectory and with this week's launch of the CBOE Bitcoin futures contract, many commodity investors have been asking: Is Bitcoin taking demand from gold? We believe the answer is no."