ECB Economists: Bitcoin Fails to Become Global Decentralized Digital Currency, BTC's Fair Value Is Still Zero

ECB Faces Backlash Over Bitcoin Criticism

The European Central Bank (ECB) published a blog post on Thursday titled “ETF approval for bitcoin – the naked emperor’s new clothes.” The post was authored by economists Ulrich Bindseil, ECB’s director general for market infrastructure and payments, and Jürgen Schaaf, ECB’s advisor for market infrastructure and payments.

The ECB also posted on social media platform X Thursday:

Bitcoin has failed to become a global decentralised digital currency, instead falling victim to fraud and manipulation. The recent approval of an ETF doesn’t change the fact that bitcoin is costly, slow and inconvenient, argues the ECB blog.

Addressing the approval of spot bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) in early January, the blog post authors described: “We … reiterate that the fair value of bitcoin is still zero. For society, a renewed boom-bust cycle of bitcoin is a dire perspective. And the collateral damage will be massive, including the environmental damage and the ultimate redistribution of wealth at the expense of the less sophisticated.”

The authors then referenced an ECB blog post from November 2022 that they believe “debunked the false promises of bitcoin and warned of the social dangers if not effectively addressed.”

They detailed: “We argued that bitcoin has failed to fulfill its original promise to become a global decentralised digital currency. We also showed that bitcoin’s second promise to be a financial asset, the value of which would inevitably continue to rise, was equally wrong.” Moreover, they noted: “We warned about the risks to society and the environment if the bitcoin lobby managed to re-launch a bubble with the unintended help of legislators, who could give a perceived blessing where a ban would be required.” The authors claimed:

Alas, all these risks have materialised.

“Today, Bitcoin transactions are still inconvenient, slow, and costly,” they continued, asserting that BTC is “hardly used for payments” outside criminal activities. “Likewise, bitcoin is still not suitable as an investment,” they further argued, noting that “Less financially knowledgeable retail investors are attracted by the fear of missing out [FOMO], leading them to potentially lose their money.” Moreover, they claimed: “The mining of bitcoin using the proof of work mechanism continues to pollute the environment on the same scale as entire countries, with higher bitcoin prices implying higher energy consumption as higher costs can be covered by miners.”

The ECB post drew much attention on social media. Many people praised X’s Readers added context (Community Notes) for debunking the ECB economists’ misleading claims about bitcoin. Cardano founder Charles Hoskinson described: “Community Notes just murdered the ECB.”

Community Notes also wrote: “Chainalysis found that only 0.34% of the transaction volume with cryptocurrencies in 2023 was attributable to criminal activity … Illicit transactions with euros accounted for 1% of the EU’s GDP or €110 billion in 2010.” Meanwhile, the ECB posted its first annual loss in two decades this week.

Comments also flooded the ECB post. “This feels a bit like one of the world’s largest horse and buggy operators arguing against the advent of motor vehicles, with: ‘There are no connected roads, only criminals would need such a mode of transportation, and it’s just too expensive.’ And of course, in the end, they would be wrong. And soon extinct,” former hedge fund manager James Lavish opined.

Crypto analyst Plan B detailed: “European Central Bank is literally run by a fraud-convicted criminal. Bitcoin is recognized by largest global asset managers like Blackrock & Fidelity as the best-performing asset. ETFs give investors better access to this superior asset, regardless of central bank FUD and lies.” Angel investor Balaji Srinivasan noted: “The euro has collapsed against bitcoin.” Fund manager Ronnie Stoeferle replied to the ECB post: “Just stop it. It’s embarrassing.”

What do you think about the ECB economists’ claims regarding bitcoin and the crypto community’s responses to their statements? Let us know in the comments section below.