ECB Writes Another Bitcoin Obituary
Unable to merely watch the crypto craze, the European Central Bank's latest blog post seeks to temper BTC enthusiasts' fervor.
The article's authors, financial analysts Ulrich Bindseil and Jürgen Schaaf, alert the crypto community to the looming era of digital asset crashes, painting a grim picture of Bitcoin. So grim, in fact, that it makes even the notorious international terrorist Osama bin Laden appear in a comparatively angelic light.
Bitcoin's numerous "deaths" are no longer shocking, with the Bitcoin Obituaries website cataloging over 400 entries predicting its collapse, dating back to 2010. Bitcoin has been dubbed a Ponzi scheme, a bubble, and even likened to a virus that escaped a lab.
Venture capitalist Kevin O’Leary dismissed BTC as "garbage" and a "digital game" in 2019. Ironically, two years later, Kevin received nearly $15 million from FTX for becoming its spokesperson and invested over $9 million in cryptocurrency.
The latest entry in the grim list of "this time it's definitely dead" refers to the ECB's dire prophecy.
Bitcoin has been 'buried' numerous times. Source: news.bitcoin.com
We've distilled key insights from the article to allow you to gauge the analysts' penetrating perspective.
Bitcoin Lacks Use Outside the Darknet
Ulrich and Jürgen argue that “outside the darknet, the hidden part of the internet used for criminal activities, it is hardly used for payments at all. The regulatory initiatives to combat the large-scale use of the Bitcoin network by criminals have not been successful yet.”
It seems ECB staff are disregarding the opinion of their American counterparts from the U.S. Treasury Department, who concluded that the presence of illicit finance within the digital asset ecosystem is greatly exaggerated. This was stated in January 2024, with an article available on the official website.
Moreover, ECB analysts believe crypto is unsuitable as investment. They claim it “does not generate any cash flow (unlike real estate) or dividends (stocks), cannot be used productively (commodities), and offers no social benefit (gold jewellery) or subjective appreciation based on outstanding abilities (works of art).”
It appears those burying cryptocurrencies are unaware of Real World Assets (RWAs), the fact that NFTs are sold at the most expensive auctions, or tokenized gold.
Bitcoin Lacks Fair Value and Backing
The article notes that “the history of Bitcoin has been characterised by price manipulation and other types of fraud. This may not be very surprising for an asset that has no fair value and no reserve backing”.
ECB staff mention that the crypto winter has adjusted the scale of manipulations but hasn't changed the essence – trading volumes on cryptocurrency exchanges are mostly inflated.
But what fair value does the euro – the currency of 340 million Europeans – hold, and what backs it? Or the American dollar? Ulrich Bindseil and Jürgen Schaaf, more than anyone, know that the most significant fiat currencies are backed by nothing but trust in the government.
What Does This Imply?
After accusing Bitcoin of fraud, manipulation, money laundering, and financing terrorism, the article authors come to an unexpected conclusion: “The Bitcoin network has a governance structure in which roles are assigned to identified individuals. Authorities could decide that these should be prosecuted in view of the large scale of illegal payments using Bitcoin. Decentralised finance can be regulated as forcefully as the legislator considers necessary.”
With this statement, they have outdone even the "anti-crypto queen" Elizabeth Warren. Not even she had thought to appoint a "Bitcoin CEO" or try to hold BTC miners accountable, who are merely entrepreneurs acting of their own accord and subject only to the network's algorithmic consensus.
Interestingly, the same analysts made a similar statement on November 30, 2022. Then, they also warned of BTC's imminent crash and its loss of relevance due to falling prices.
Yet, BTC's new price peaks once again showed skeptics that the market is fully capable of independently determining the value of an asset based on the simple laws of supply and demand, rather than demagoguery and sophistry.
