The European Central Bank (ECB) has published a critical report on Bitcoin. The report follows the approval of Bitcoin ETFs in January by the US Securities and Exchange Commission.
In a blog post by Ulrich Bindeil, DG of Market Infrastructure & Payments at the ECB, and Jürgen Schaaf, Advisor, Market Infrastructure & Payments, the pair state that Bitcoin has failed on the promise of a decentralized digital currency and is not suitable as an investment. They say Bitcoin is “still hardly used for legitimate transfers.”
At the same time, the writers reference a previous post from November 2022 that warned about the “false promise of Bitcoin” while cautioning about “social dangers.” The post was titled Bitcoin’s Last Stand.
The report disparages Bitcoin as:
- Bitcoin transfers are slow, costly, and inconvenient, while BTC is being used by criminals on the darknet.
“Even the full sponsoring by the government in El Salvador which granted it legal tender status and tried hard to kick off network effects through an initial Bitcoin gift of $30 in free bitcoin to citizens could not establish it as successful means of payment.”
- Bitcoin is not suitable as an investment as it does not generate cash flow or dividends and cannot be used like a commodity. Also, there is no social benefit.
- Bitcoin mining harms the environment due to the energy usage for minting BTC
So while acknowledging that Bitcoin has rebounded from its lows, nearing its previous all-time high, the authors predict this could be a “flash in the pan.”
Bitcoin is slammed as having structural problems and has a history of price manipulation:
“the ongoing manipulation of the “price” in an unregulated market without oversight and without fair value, the growing demand for the “currency of crime,” and shortcomings in the authorities’ judgments and measures.”
The report states that Bitcoin should be subject to strong regulatory intervention “up to practically forbidding it.”
“It is important for authorities to be vigilant and protect society from money laundering, cyber and other crimes, financial losses for the financially less educated, and extensive environmental damage. This job has not been done yet.”