Bitcoin is on the ‘road to irrelevance’ warns the European Central Bank
Officials from the European Central Bank (ECB) have dismissed Bitcoin (BTC), labeling the digital asset inappropriate both as a payment mechanism and as an investment vehicle amid the widespread fallout in crypto markets following the collapse of FTX.
The stabilization of Bitcoin’s value around $20,000 – down from its 2021 peak of roughly $69,000 – was an “artificially induced last gasp before the road to irrelevance,” Ulrich Bindseil and Jürgen Schaaf wrote in a blog post titled ‘Bitcoin’s last stand‘ on Wednesday, November 30, refuting claims that BTC would recover from the recent decline.
Bitcoin’s “conceptual design and technological shortcomings” made transactions “heavy, slow and expensive”, according to the two central bankers, making the flagship digital currency a “dubious” form of payment. In the spirit of progress and innovation, they argued that policymakers should not give cryptocurrencies official status.
“It does not generate cash flow (like real estate) or dividends (like stocks), cannot be used productively (like commodities) or provide social benefits (like gold). The market valuation of Bitcoin is therefore based entirely on speculation.
ECB critical of regulators
Moreover, the blog was also critical of regulators, arguing that the existing crypto frameworks were formed by fallacies such as the assumption that innovation had to be promoted at all costs. The post said: “the belief that room for innovation must be made at all costs stubbornly persists.”
“Since Bitcoin does not appear to be suitable as a payment system or as a form of investment, it should be treated as neither in regulatory terms and therefore should not be legitimized,” they said.
The post follows Mark Branson, the president of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) interview with the ECB earlier this month, where he said that crypto firms bring ‘freeloaders and crooks’.
Meanwhile, back in October, the European Securities and Markets Authority (ESMA) warned that growing crypto adoption could affect traditional finance. ESMA argued that due to its volatility and lack of regulation, crypto carries countless financial stability risks.
Finally, Christine Lagarde, the president of the European Central Bank, has also expressed her concern that the expansion of cryptocurrency could pose a risk to the conventional banking system, as Finbold reported in late September.
