Bitcoin maximalists consider the world’s premier cryptocurrency a near-perfect monetary instrument, devoid of artificial manipulation by central banks and reflective of market forces in a pristine form. Considering its baked-in supply scarcity, Bitcoin is often touted as digital gold. However, key officials at the European Central Bank (ECB) have now unleashed scathing criticism against the cryptocurrency, taking aim at Bitcoin’s legendary volatility.
— European Central Bank (@ecb) November 30, 2022 The director general of ECB’s Directorate General Market Operations, Ulrich Bindseil, has authored a blog post on Bitcoin in collaboration with Jürgen Schaff, an advisor. This post takes a no-holds-barred approach to the world’s largest cryptocurrency by market capitalization. As per the contents of the blog post, the ECB officials believe that the current period of relative stabilization in Bitcoin’s value, as characterized by its gyrations within the $15,000 to $20,000 price range, is merely a prelude to the eventual destruction of the cryptocurrency: The ECB officials then go on to raise three major points. Firstly, Bindseil and Schaff state that Bitcoin is rarely used for legal transactions and that the cryptocurrency represents a Ponzi scheme of sorts where the “big Bitcoin investors” have every incentive in the world to keep the gravy train flowing. Interestingly, Bindseil and Schaff have provided no information as to the proportion of transactions on Bitcoin they consider illegal. They have also eschewed a comparative analysis with fiat-based currencies on this metric. Secondly, the ECB officials apparently believe that just because governments around the world are enacting regulations on cryptocurrencies, it does not automatically bestow legitimacy on this nascent sector. The post then goes on to berate Bitcoin for being “an unprecedented polluter” by consuming as much electricity per year as Austria. This, however, is a false equivalence. As we’ve repeatedly noted, a significant proportion of Bitcoin mining is now done using renewable energy resources. Moreover, Bitcoin still consumes only a fraction of the energy used by the global financial industry. Bindseil and Schaff then end their blog post by warning banks regarding reputational risks that supposedly emanate from dabbling in cryptocurrencies: Do you think the ECB is now taking a definitive stance against Bitcoin? Let us know your thoughts in the comments section below.
