Officials from the European Central Bank (ECB) have made a firm rejection of Bitcoin (BTC) by labelling the digital asset as 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 approximately $69,000 — was an “artificially induced last gasp before the road to irrelevance,” wrote Ulrich Bindseil and Jürgen Schaaf in a blog post entitled ‘Bitcoin’s last stand’ on Wednesday, November 30, refuting claims that the BTC would rebound from its recent decline.
Bitcoin’s “conceptual design and technological shortcomings” made transactions “cumbersome, slow, and expensive,” according to the two central bankers, making the flagship digital currency a “questionable” form of payment. In the spirit of progress and innovation, they argued that policymakers shouldn’t grant cryptocurrencies official status.
“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). The market valuation of Bitcoin is therefore based purely on speculation.”
ECB critical of regulators
Whatsmore, the blog was also critical of regulators, claiming that the existing crypto frameworks were formed by fallacies such as the assumption that innovation had to be promoted at any cost. The post stated: “the belief that space must be given to innovation at all costs stubbornly persists.”
“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,” 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 in which he said that crypto firms come with ‘freeloaders and crooks’.
Meanwhile, back in October, the European Securities and Markets Authority (ESMA) warned that growing crypto adoption could affect traditional finance. The 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, also has voiced her concern that the expansion of cryptocurrency could pose a risk to the conventional banking system, as Finbold reported at the end of September.