- Calls for Bitcoin regulation, possible ban.
- Early Bitcoin adopters get rich at the expense of others.
- Crypto experts push back against paper.
Almost since its launch in 2008, Bitcoin has been a target of harsh criticism by key financial institutions. Global regulators targeted the asset for its perceived lack of real value, high energy costs, and effects on monetary policy.
Most recently, economists from the European Central Bank, the chief monetary authority in the European Union, have released a report on Bitcoin’s effects on wealth distribution. The scathing report ignited heated responses from crypto experts, who called it a full-scale attack on crypto.
Key Claims by the ECB Paper on Bitcoin
The European Central Bank’s (ECB) recent paper has caused outrage among crypto supporters. On October 12, ECB economists published “The Distributional Consequences of Bitcoin,” arguing Bitcoin would worsen wealth inequality.
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According to economists Ulrich Bindseil and Jürgen Schaaf, Bitcoin is a “zero-sum game,” favoring early adopters while harming everyone else. Even in a “Bitcoin-positive scenario,” where the price continues to rise, its effect on inequality will remain negative.
The key claim in the report is that Bitcoin does not increase productivity. Rather, it just redistributes financial rewards. The authors suggest that it gives massive financial rewards to early adopters, while latecomers lose out.
Crypto Experts React to “Attack on Crypto”
The report’s claims did not go unnoticed by the crypto experts, who saw it as an attack on the industry. For example, Tuur Demeester, Editor-in-Chief of Adamant Research, a Bitcoin-focused investment firm, called the paper a “declaration of war” on Bitcoin.
He accused the ECB of using outdated arguments to justify a crackdown on Bitcoin while ignoring its role as a store of value. “It’s clear that these central bank economists now see Bitcoin as an existential threat, to be attacked with any means possible,” he explained.
Other experts pointed to Bitcoin’s importance in facilitating international payments. Bitcoin’s programmable nature enables users to bypass the labyrinth of counterparties, banks, and red tape that makes international payments inefficient.
On the Flipside
- This is not the first time the ECB has criticized Bitcoin. In February, the central bank claimed that Bitcoin failed as a currency, and called it a den of fraud and criminality.
- Unlike US regulators, European authorities are much more favorable to smart contract platforms like Ethereum.
Why This Matters
The paper by the European Central Bank economists reveals the regulator’s negative attitude towards Bitcoin. As such, it signals a potential regulatory shift in one of the largest economies in the world.
Read more about the ECB’s criticism of Bitcoin:
“Bitcoin Has Failed”: ECB Warns “House of Cards” Will Implode
Read more about Lunar Digital Assets:
How Lunar Digital Assets Is Supporting Grassroots Crypto
