We can now add the European Central Bank to the ranks of high-ranking crypto skeptics, with high-ranking execs going further to say that crypto shouldn’t be legitimized by any government or major financial institution.
In a blog post written by ECB execs Ulrich Bindseil, director general of market infrastructure, and Jürgen Schaaf, an ECB markets advisor, the pair said that bitcoin is currently experiencing an “artificially induced last gasp before the road to irrelevance.” Bitcoin’s precipitous fall in price over the past few years and the implosion of major crypto institutions—most recently the collapse of FTX and its subsequent fallout—shows that even if the price of bitcoin is stabilized, that won’t stop the tide from turning, according to the authors.
The pair noted the value of bitcoin peaked at $69,000 in November 2021 but that enormous price toppled to just $17,000 by mid-June this year. The price has hovered somewhere around $20,000 in the intervening months. But on Wednesday morning, it was fluctuating around $16,800. The issues bitcoin faces were prevalent even before the ongoing drama with the end of FTX, the authors said.
The usually straight-laced and starched members of Europe’s preeminent central bank did not seem to hold their tongue describing what they saw as a “questionable means of payment,” despite its original stated goals of upending the international financial system. The pair accurately stated that “bitcoin has never been used to any significant extent for legal real-world transactions.”
It’s hard for even the most brazen crypto bro to deny that the world’s biggest cryptocurrency has been at the heart of illicit online transactions, scams, theft, and money laundering for years now. And the lengthy transaction times and related fees have made bitcoin impractical as a general currency.
Bindseil and Schaaf blamed the crypto promoters and large crypto whales who “have the strongest incentives to keep the euphoria going” on the crypto “speculative bubble,” further noting that some venture capital firms have put $17.9 billion into the crypto and blockchain industry. Bitcoin mining, the process by which new bitcoin is made, consumes an enormous amount of energy and creates an inordinate amount of carbon emissions. New York state just recently issued a moratorium on crypto mining citing these same complaints.
As far as crypto regulation is concerned, the pair at the ECB remain skeptical. They pointed to the increase in lobbying efforts, especially in the U.S., and that legislation and regulatory frameworks have been so slow to roll out since legislators still believe they must bow to the whims of innovation. They seem to imply any tacit approval of bitcoin, whether by governments or financial institutions, only further perpetuates the fraud.
“The supposed sanction of regulation has also tempted the conventional financial industry to make it easier for customers to access bitcoin,” the ECB pair wrote. “This concerns asset managers and payment service providers as well as insurers and banks. The entry of financial institutions suggests to small investors that investments in bitcoin are sound.”
Big banking institutions were originally miffed at the idea of crypto (remember, crypto was supposed to “replace” centralized finance) but seeing the sky-high profits caused banks like JPMorgan Chase and Goldman Sachs to start chasing that bitcoin rainbow in the sky. Unfortunately, the collapse of the crypto market in mid-to-late spring 2022 put a new focus on the problems inherent in volatile digital currencies. Some major banks like JPMorgan are still in on the action while promoting more regulation, which may be why the ECB execs are putting their foot down.
The blog post could be read as more of a staked opinion, rather than a full-blown data-crunching report. For that, you could turn to the Bank of International Settlements which recently proposed that the vast majority of people who put a stake in bitcoin have lost money. That report did make assumptions that people who downloaded crypto apps also invested in crypto, but its authors noted that predominantly young, male investors are drawn to crypto—not because of any lofty belief in decentralized finance or an end to big banks, but because they are simply trying to make a quick buck.