A European Central Bank blog post says bitcoin is “on the road to irrelevance.”
Two advisors at the European Central Bank, Ulrich Bindseil, a director general, and Jürgen Schaaf, a former ECB vice president, have published a blog arguing that bitcoin is unsuitable as a means of payment or an investment asset.
The post was published shortly after lawmakers in Brazil moved to make cryptocurrency a legal form of payment.
Titled “Bitcoin’s last stand,” the Wednesday (Nov. 30) blog post outlines a brief history of the cryptocurrency before stating that it is a purely speculative asset prone to bubbles and bursts.
They rebuke venture capital (VC) firms that invest in bitcoin and crypto investors that lobby for more favorable regulation. Saying that in the U.S. the number of crypto lobbyists has almost tripled from 115 in 2018 to 320 in 2021, they warn that lawmakers have sometimes created regulations that give the impression that crypto assets are “just another asset class.”
Although they welcome crypto regulation like the EU’s Markets in Crypto Assets (MiCA), they caution against allowing regulation to legitimize bitcoin.
After all, although MiCA is intended to prevent rogue firms from promoting crypto without sufficiently warning about the risks involved in crypto investment, the market’s notorious volatility is unlikely to die down as the result of a single piece of legislation.
What’s more, the authors write that “the financial industry should be wary of the long-term damage of promoting Bitcoin investments,” noting that “the negative impact on customer relations and the reputational damage to the entire industry could be enormous.”
Finally, they point to the well-documented environmental impact of bitcoin mining. “The entire Bitcoin system generates as much e-waste as the entire Netherlands,” they observe.
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