Marking the latest blow to believers of digital currencies, no less than the European Central Bank has openly declared war on Bitcoin in a recent communique.
The missive was published directly on the ECB’s Blog on Nov. 30 and is titled Bitcoin’s Last Stand. Despite being transmitted under the form of a blog post, this was no SEO filler content created by a marketing department intern.
Instead, the lead author of the piece is Ulrich Bindseil, Director General of the ECB’s Market Infrastructure & Payments Division, and Jürgen Schaaf, positioned as an advisor in the same department according to LinkedIn.
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The post opens with something of a rain of fire as it notes that Bitcoin’s market value has absolutely cratered from $69,000 USD in November of 2021 to as low as $15,000 just a year later in November of 2022 following the wake of the FTX/Alameda Research ponzi scheme going up in smoke.
“Since then, the value has fluctuated around USD 20,000. For bitcoin proponents, the seeming stabilization signals a breather on the way to new heights,” Bindseil states.
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And then drives the nail, “More likely, however, it is an artificially induced last gasp before the road to irrelevance…and this was already foreseeable before FTX went bust and sent the bitcoin price to well below USD16,000.”
The ECB takes issue with Bitcoin on several fronts. One of the largest is laid out plainly in a subsection titled Bitcoin is Rarely Used for Legal Transactions where the bank points out a key fact: “Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment: real Bitcoin transactions are cumbersome, slow and expensive.”
The authors also take issue with two other facts: “The market valuation of Bitcoin is…based purely on speculation” and “Bitcoin is also not suitable as an investment.”
They clarify, “It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold).”
Thirdly, the ECB takes issue with Bitcoin’s enormous computer hardware and electrical consumption footprint to traverse the limited number of transactions it does, “It’s also worth noting that the Bitcoin system is an unprecedented polluter. First, it consumes energy on the scale of entire economies.”
“Bitcoin mining is estimated to consume electricity per year comparable to Austria. Second, it produces mountains of hardware waste. One Bitcoin transaction consumes hardware comparable to the hardware of two smartphones,” the piece continues.
“The entire Bitcoin system generates as much e-waste as the entire Netherlands. This inefficiency of the system is not a flaw but a feature. It is one of the peculiarities to guarantee the integrity of the completely decentralised system.”
It’s worth noting that the missive does more than complain about Bitcoin. To the contrary, it declares that so much as regulating today’s digital currencies can be seen as giving them undeserved legitimacy in a subsection titled Regulation can be Misunderstood as Approval.
The final section, titled Promoting Bitcoin Bears a Reputational Risk for Banks, drives home this position as Bindseil and Schaff state, “Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised.”
“Similarly, the financial industry should be wary of the long-term damage of promoting Bitcoin investments – despite short-term profits they could make (even without their skin in the game).”
And states further, “The negative impact on customer relations and the reputational damage to the entire industry could be enormous once Bitcoin investors will have made further losses.”
Yet, for advocates of the ability to have access to a financial system that is outside the long arm of a centralized government entity, the missive is cause for a concern that the ECB does a fine job of evidencing on their behalf.
In a sidelink to the article, the bank has listed “Related” issuances dating all the way back to October of 2020, all advocating for the installation of a central bank digital currency.
Pieces with titles such as We Must be Prepared to Issue a Digital Euro, Digital Central Bank Money for Europeans – Getting Ready for the Future, and The ECB’s Case for Central Bank Digital Currencies are just three such instances.
