The ECB’s blog post criticized bitcoin’s utility and questioned its value, even after the SEC approved the ETF, warning of potential public risks.
In a recent European Central Bank (ECB) blog post, Ulrich Bindzeil and Jürgen Schaaf expressed strong skepticism about the utility and value of bitcoin, even after the US Securities and Exchange Commission’s approval of spot bitcoin exchange-traded funds (ETFs). . The post, titled “Bitcoin ETF Approval – The Naked Emperor’s New Clothes,” claims that Bitcoin has not lived up to its promises and is still not suitable as a means of payment or investment.
ECB officials argue that bitcoin’s fair value is zero and the approval of the ETF does not change bitcoin’s fundamental flaws. They argue that a renewed bitcoin boom-bust cycle would result in significant collateral damage, including environmental damage and a redistribution of wealth from less sophisticated to more savvy investors.
The blog post reflects on Bitcoin’s history, noting that it has failed to become a global decentralized digital currency and is minimally used for legal transfers. The authors point out that Bitcoin’s second promise of being an ever-appreciating financial asset is equally flawed. They are concerned about the risks to society and the environment if the Bitcoin bubble is re-inflated, potentially with the unwitting help of lawmakers.
The approval of the bitcoin spot ETF by the SEC on January 10 was interpreted by some as a confirmation of safety and an unstoppable triumph for bitcoin investments. However, the ECB’s blog post strongly disputes these claims, suggesting that the consequences for society could be dire.
Bindseil and Schaaf also comment on Bitcoin’s continued impact on the environment, comparing its energy consumption to that of entire countries. They call for increased due diligence by retail investors and highlight the prevalence of individuals with less financial knowledge, attracted by the fear of missing out, leading to potential losses.
Despite the negative stance towards Bitcoin, cryptocurrency has seen a significant recovery from under $17,000 to over $52,000 since the end of December 2023. This recovery is due to several factors, including the prospects for a turnaround in the US Federal Reserve’s interest rate policy, the halving of BTC mining rewards, and the approval of SEC for ETFs.
The ECB’s blog post concluded that authorities must remain vigilant to protect society from the various risks associated with Bitcoin, including money laundering, cybercrime, financial losses for less-educated investors and environmental damage. The blog calls for a more serious approach to protecting against these dangers.
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