Economists at the European Central Bank (ECB) argue that Bitcoin (BTC) has limited uses and therefore no longer qualifies as a legitimate currency.
zero value
On February 22, Ulrich Bindtheil, Director-General for Market Infrastructures and Payments at the ECB, together with Jürgen Schaaf, Adviser for Market Infrastructures and Payments, published an article titled “Approval of Bitcoin by ETFs – The Naked Emperor’s New Clothes” Published a co-authored blog post. ”
The two economists started the match by scolding U.S. regulators for approving a spot Bitcoin exchange-traded fund (ETF) in January.
“For Disciples, the official approval confirms that Bitcoin investment is safe, and the rally to date is proof of an unstoppable victory. We disagree with both claims and believe that Bitcoin We reiterate that the fair value of is still zero,” Binttheil and Scharf wrote.
They argue that transactions involving Bitcoin remain inconvenient, time-consuming and costly. Furthermore, they argue that Bitcoin is still primarily used to pay for illegal activities, with minimal legal use outside of this realm.
As a result, Bitcoin is susceptible to fraud and manipulation, making it unable to fulfill its promise to become a global decentralized digital currency, they said.
The authors referenced a previous ECB blog post from November 2022 that debunked the ECB's claims of Bitcoin's false promise.
In their analysis, they highlighted that Bitcoin has failed both as a global decentralized digital currency and as a financial asset that continues to rise in value.
The ECB also warns of the risks to society and the environment if Bitcoin experiences another bubble, especially if supported by lawmakers who could inadvertently encourage Bitcoin's growth instead of imposing necessary regulations. warned about.
This blog post received a lot of attention on social media from crypto industry insiders.
The ECB is not the only financial authority to question Bitcoin's potential as a valuable digital currency.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, recently expressed skepticism about whether Bitcoin can act as an effective hedge against inflation.
Kashkari argued that Bitcoin is simply considered another risky asset with no practicality in a real-world economic scenario. Please refer to the following.
Cryptocurrency advocates and organizations regularly push back against skeptics, arguing that the euro is losing purchasing power over cryptocurrencies.
A recent report by Chainaosis claims that 0.34% of crypto trading volume in 2023 will be related to criminal activity.
The data firm then contrasted this with illegal trade over the euro, which accounted for 1% of the EU's GDP in 2010, or 110 billion euros.
declining fortunes
The ECB recently disclosed It was the first annual loss in 20 years, reaching 1.3 billion euros ($1.4 billion) in 2023. This loss was primarily due to higher interest expense on major liabilities, while interest income on assets was delayed due to fixed interest rates and long maturities.
Despite the losses, the ECB cited large capital and revaluation accounts totaling €46 billion by the end of 2023. He also reassured that while the central bank expects further losses to occur in the coming years, these losses will not hamper its ability to conduct effective monetary policy. , after which a sustained recovery in profits is expected.
The central bank has announced an increase in inflation from July 2022 to September 2023 in response to rising inflation caused by the COVID-19 pandemic and disruptions to energy access following Russia's invasion of Ukraine. The interest rate was adjusted from negative territory to a record high of 4%.
The ECB confirmed its ability to operate effectively and fulfill its mission of maintaining price stability despite losses. With the intention of offsetting this loss with future profits, it has decided not to distribute profits to euro area central banks in 2023.
