Aside from speculation, the main function of bitcoin is to facilitate criminal activity so central banks must crack down on it, according to Augustin Carstens, general manager of the Bank for International Settlements (BIS).
the Bank for International Settlements is a central bank used by other central banks, for example, the Bank of England has its own account with BIS.
The organisation also seeks to contribute to global monetary and central bank policy.
Mr Carstens is a former governor of the Mexican central bank.
In a speech delivered at Goethe University in Germany yesterday (6 February), Mr Carstens said: "The current fascination with these cryptocurrencies seems to have more to do with a speculative mania than any use as a form of electronic payment, except for illegal activities.
"Accordingly, authorities are edging closer and closer to clamping down to contain the risks related to cryptocurrencies. There is a strong case for policy intervention."
Mr Carstens said Bitcoin's rise has been a combination of a "bubble, a ponzi scheme and an environmental disaster."
The environmental reference is to the fact that, according to Mr Carstens, "the electricity used in the process of mining Bitcoins is staggering, estimated to be equal to the amount Singapore uses every day in electricity, making them socially wasteful and environmentally bad."
He said: "Novel technology is not the same as better technology or better economics. That is clearly the case with Bitcoin: while perhaps intended as an alternative payment system with no government involvement, the volatility of Bitcoin renders it a poor means of payment and a crazy way to store value.
"Very few people use it for payments or as a unit of account. In fact, at a major cryptocurrency conference the registration fee could not be paid with Bitcoins because it was too costly and slow: only conventional money was accepted.
"To the extent they are used, Bitcoins and their cousins seem more attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions.
"In a way, this should not be surprising, since individuals who massively evade taxes or launder money are the ones who are willing to live with cryptocurrencies' extreme price volatility."
Bitcoin has tumbled through 2018, dropping in price from close to $20,000 (£14,397) in December 2017, to the level this morning of $7,437 (£5,350).
Late last year the Financial Conduct Authority (FCA) warned about the "significant risk" of bitcoin.
Philip Milton, who runs Phillip Milton and Co, an adviser firm in Devon, said speculation in artificial, virtual reality tokens from a glorified computer game called Bitcoin which will fade as quickly as it started.
david.thorpe@ft.com
