In a recent post on The ECB Blog, European Central Bank officials Ulrich Bindseil and Jürgen Schaaf issued a scathing critique of bitcoin, claiming that it has failed to deliver on its promise as a global decentralized digital currency. The post, titled “ETF approval for bitcoin: The naked emperor's new clothes,” was published on February 22, 2024, and comes in the wake of the approval of spot exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC). .
The ECB tries once again to smear bitcoin
The ECB's statement on The recent approval of an ETF does not change the fact that bitcoin is expensive, slow and inconvenient.”
bitcoin has failed to become a global decentralized digital currency, but has instead been a victim of fraud and manipulation.
The recent approval of an ETF does not change the fact that bitcoin is expensive, slow and inconvenient, argues #TheBlogECBBhttps://t.co/e9Ek01Dism pic.twitter.com/ddBFsv4g0w
— European Central Bank (@ecb) February 22, 2024
Bindseil and Schaaf argue that btc has not been widely used for legitimate transfers and is not suitable as a means of payment or investment. They criticize cryptocurrency for not generating any cash flow, dividends or social benefits, and for being an instrument of environmental damage due to the energy-intensive proof-of-work mechanism used in mining.
Despite the SEC's approval of btc spot ETFs, which was seen by many as a validation of the cryptocurrency's investment safety and a precursor to a rally, ECB officials maintain that the “value reasonable price of bitcoin remains zero.”
They call the recent btc price rally a “dead cat bounce” and point to the speculative nature of btc price increases and warn of the potential for a renewed boom-bust cycle that could have significant collateral damage, including damage environmental protection and the redistribution of wealth at the expense of less sophisticated investors.
The blog post also addresses the use of bitcoin for illicit activities, noting the continued rise in transactions associated with money laundering, terrorist financing, and ransomware attacks. ECB officials criticize regulatory approaches in both Europe and the United States, suggesting that the decentralized nature of bitcoin has led to a regulatory fatalism that has not effectively combated these problems.
Furthermore, the blog highlights the irony of btc, a cryptocurrency that sought to bypass traditional financial systems, relying on conventional intermediaries such as ETFs to attract a broader group of investors. The authors argue that this underlines the speculative and unproductive nature of btc as an asset.
The blog post concludes: “bitcoin's price level is not an indicator of its sustainability. There is no fundamental economic data, there is no reasonable value from which serious forecasts can be derived. There is no “proof of price” in a speculative bubble. (…). “Market” capitalization quantifies the overall social damage that will occur when the house of cards collapses.”
The bitcoin community reacts
The latest criticism from the ECB has caused a storm of reactions in the community. Several prominent voices within the bitcoin ecosystem have come forward to question the ECB's views.
James Butterfill, Head of Research at Coin Shares, voiced disbelief at the ECB's stance, commenting: “The ECB is starting to look like a joke in its understanding of btc as an asset, and also its impact on the environment.”
Alessandro Ottaviani offered a response criticism of the ECB's previous assessments of bitcoin, highlighting the cryptocurrency's significant price appreciation since the ECB's November 2022 article that claimed btc was on a “path to irrelevance.”
Ottaviani stated: “The ECB wrote an article in November 2022 stating that 'bitcoin is embarking on a path to irrelevance.' Meanwhile, bitcoin was at $17,000 and is now at $52,000 (+205%). They were wrong 15 months ago and they are wrong now. Time will show it. “bitcoin is the best form of money humanity has ever had, it is not on the irreversible path to becoming a global store of value.”
Daniel Batten, managing partner of CH4 Capital, took a more humorous approach in his answer, highlighting the misinterpretations and misunderstandings surrounding the utility and adoption of bitcoin. Batten sarcastically thanked the ECB for its “entertainment,” suggesting that his analysis missed the mark on the real status and potential of btc as a decentralized digital currency and investment asset.
“Did it fail to be a global decentralized digital currency? bitcoin has more than 300 million users in just 15 years. In terms of user adoption, it is growing faster than the Internet,” Batten noted, correcting the ECB's underestimation of bitcoin's reach and impact.
and sustained referred to the ECB's own words from 2012, which make clear why the ECB is so hostile towards bitcoin: the fear of a monetary revolution.
The ECB wrote in 2012: “bitcoin could have a negative impact on the reputation of central banks, assuming the use of such systems grows and in case an incident attracts the press, as the public may perceive the incident as caused by a CB does not do its job well”
At the time of publication, btc was trading at $51,116.
Featured image created with DALL·E, chart from TradingView.com
