The ECB at loggerheads with Bitcoin- The Cryptonomist


With the passage of time, Bitcoin is increasingly seen as a recognized and accepted asset in the global financial world. The ECB, which has always been critical on the subject, has published an analysis entitled “The Bitcoin challenge: how to tame a digital predator”.

The ECB’s analysis on Bitcoin

The analysis was written by three distinguished figures from the European Central Bank, namely: 

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  • the director general of payment infrastructure Ulrich Bindseil
  • the ECB head of payments Patrick Papsdorf,
  • Jurgen Schaaf, senior management advisor for the ECB and market payment infrastructure.

They are all technology-minded, yet all interested in preserving the status quo, or more accurately making cryptocurrencies disappear. According to what is reported in the analysis of the three exponents, in fact, Bitcoin is seen as a payment instrument of little relevance with slow and expensive transactions that make it little usable as an exchange currency adoptable on a large scale. In addition to a practical problem, it is also described as very volatile and very bad as a store of value when compared to gold; the picture closes with the significant environmental and energy impact of its method of payment and exchange. 

They conclude the note as follows: 

“What follows is that the market valuation of Bitcoin is purely based on speculation: its market rally only continues as long as the Bitcoin community’s belief about Bitcoin’s alleged advantages can be maintained. But enthusiasm alone is not enough in the long run, as Bitcoin is in the end only a number chain and technologies are replaced by better technologies – with the newer soon displacing the new”.

BCE Bitcoin
The ECB remains critical of Bitcoin

Bitcoin challenges the central banks

The report of the ECB analysts, while also shared in recent statements by UBS, seems just one of the last desperate cries of a sick and ineffective system. Bitcoin in fact has proven to be very reliable over time and has constantly improved the exchange of currencies making it easier and faster and even being adopted as official currency in some countries such as El Salvador

Bitcoin is a store of value and although it is no longer galloping towards absurd figures as in the past year, it is confirmed as such. 

In fact, it is important to keep in mind that the virtual currency undergoes cycles of four years, two of ascent and two of contraction and in this period we are in the latter phase with some news. It is the first time in its history that the currency has this global spread and above all now it is also adopted by some central banks and has investors everywhere. Last but not least, mining Bitcoin is the greenest thing that can exist: if on the one hand, the energy needed to produce Bitcoin is huge, on the other hand, it always uses energy from natural sources, geothermal, wind, tides, solar, sources that were wasted or not properly exploited. 

In short, the war between central banks and Bitcoin is just beginning, both look at each other from afar but the financial world wants them more and more connected. 

The ECB and other central banks fear disaster in the wallets of savers for an eventual failure of Bitcoin but in reality, it is only the fear that Bitcoin will erode some of that market and power that to date has seen them dominate in finance. 

 





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