The European Central Bank says bitcoin is on an “artificially induced last gasp before the road to irrelevance”, an intervention arguing against giving regulatory legitimacy to the cryptocurrency.
The European Central Bank (ECB) staffers Ulrich Bindseil and Jürgen Schaaf criticized bitcoin for being a hub of illegal transactions that bring reputational risk for any bank that gets associated with the sector, in blog post.
The value of the digital currency has fallen down from a high of almost $70,000, stabilizing at about $20,000, but has fallen to a low of $16,000 since the collapse of the crypto exchange FTX.
“Big bitcoin investors have the strongest incentives to keep the euphoria going,” they wrote. “The manipulations by individual exchanges or stablecoin providers etc. during the first waves are well documented, but less so the stabilizing factors after the supposed bursting of the bubble in spring.”
The article was first published as an opinion piece in the German newspaper Handelsblatt.
“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 legitimized,” the blog post concludes.
This article brought backlash from the bitcoin community. Investor Eric Voorhees said that the line declaring the currency “artificially inflated” would be “set in a beautiful typeface, ornately displayed on heavy matte paper, and hung elegantly upon my wall”, while venture capitalist Mike Dudas contrasted the post with a chart showing the euro’s 20% decline against the dollar since 2021, arguing that it was the euro that was on the road to “irrelevance”.
Inside the EU, the Markets in Crypto-Assets regulation (MiCA) is one attempt to implement stricter requirements on the sector. The rules, which are likely to be voted into law in February, will bring new consumer protection requirements on EU-based crypto companies.
The Bank of England’s deputy governor, Sir Jon Cunliffe, on Monday stated: “We should not wait until it is large and connected to develop the regulatory frameworks necessary to prevent a crypto shock that could have a much greater destabilizing impact.”
But the bank is hindered in its ability to take action by the prime minister’s strong support of crypto. When he was chancellor in April 2021, Rishi Sunak launched a task force to examine the potential of a digital pound, and a year later he asked the Royal Mint to create the government’s first NFT. That token has still not been sold to the public, although the overall size of the crypto market has fallen by about 70% since Sunak issued the order.