- Ulrich Bindseil and Jürgen Schaaf, two ECB officials, said in a blog post that Bitcoin is on “the road to irrelevance,”
- According to them, Bitcoin has failed to improve the existing monetary and financial system and is based “purely on speculation.”
- The authors also said that Bitcoin and blockchain technologies have created “limited value for society” and that banks should avoid promoting them to save their reputations.
- Bindseil and Schaaf also took a jab at Bitcoin’s proof-of-work consensus mechanism. They say it’s an “inefficient” system, and this is a feature rather than a flaw.
The European Central Bank (ECB) has taken a jab at Bitcoin (BTC). They criticized its failure as a payment system and a form of investment, among other things.
In a blog post titled “Bitcoin’s Last Stand”, Ulrich Bindseil and Jürgen Schaaf from the ECB Market Infrastructure and Payments Division condemned Bitcoin for being rarely used for legal transactions. This is despite it being created to improve the existing monetary and financial system.
“Bitcoin's conceptual design and technological shortcomings make it questionable as a means of payment. Real Bitcoin transactions are cumbersome, slow and expensive. Bitcoin has never been used to any significant extent for legal real-world transactions,” the authors said. Bindseil and Schaaf also believe that Bitcoin is not a “suitable investment.” This is because it fails to generate cash flow or dividends and is unable to be used productively or provide social benefits. According to them, Bitcoin’s market cap, which went over $1 trillion last year, is based “purely on speculation.”
“Speculative bubbles rely on new money flowing in. Bitcoin has also repeatedly benefited from waves of new investors. The manipulations by individual exchanges or stablecoin providers etc. during the first waves are well documented. But less so the stabilising factors after the supposed bursting of the bubble in spring,” Bindseil and Schaaf said. The central bankers said that Bitcoin and blockchain technologies in general have created “limited value for society.” They added that banks should be wary of promoting and investing in something that “should not be legimitised” to mitigate reputational risk.
The authors also took a jab at Bitcoin’s proof-of-work consensus mechanism. They said that the largest cryptocurrency is “an unprecedented polluter” and that its “inefficiency” is “not a flaw but a feature” required to “guarantee the integrity of the completely decentralised system,”
Bindseil and Schaaf concluded that the recent stabilization of Bitcoin’s price, which has been fluctuating between $15,500 and $19,000 for the last few months, is not a sign of stability. Rather, it is an “artificially induced last gasp before the road to irrelevance.”
On the Flipside
- Bindseil and Schaaf’s blog post has come as no surprise. The ECB has a history of criticizing cryptocurrencies.
Why You Should Care
The ECB is one of the harshest critics of cryptocurrencies. The ECB’s newest blog post reiterates its commitment to bashing Bitcoin and blockchain technology generally, even if its statements are incorrect.
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