- The report came after the approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission in January.
- The authors state that Bitcoin is ‘still hardly used for legitimate transactions,’ and they also reference a previous article published in November 2022.
- While it is highlighted that it has recovered from low levels, the authors predict that this could be a ‘temporary surge.’
The European Central Bank (ECB) expressed its criticisms of Bitcoin in a recent report: What are the criticisms against BTC?
ECB Addresses Criticisms of Bitcoin
The European Central Bank (ECB) has published a critical report on Bitcoin. The report came after the approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission in January.
In a blog post written by Ulrich Bindeil, Director General of Market Infrastructure and Payments at the ECB, and Jürgen Schaaf, Market Infrastructure and Payments Advisor, it is stated that Bitcoin has not fulfilled its promise to be a decentralized digital currency and is not suitable for investment.
The authors state that Bitcoin is ‘still hardly used for legitimate transactions,’ and they also reference a previous article published in November 2022. This article, titled ‘Bitcoin’s Last Stand,’ warned about the ‘deceptive promise of Bitcoin’ and discussed ‘societal dangers.’
The report criticizes Bitcoin in the following ways:
- Bitcoin transfers are slow, costly, and cumbersome, and there are statements indicating that BTC is used by criminals on the dark web.
- “Despite being fully supported by the government of El Salvador and attempting to establish network effects by granting citizens $30 worth of free bitcoin through legal tender status, it failed to become a successful payment method.”
- Bitcoin is not suitable for investment as it does not generate cash flow or dividends and cannot be used as a commodity. Additionally, it lacks social benefits.
- Bitcoin mining harms the environment due to the energy consumption involved in BTC production.
The authors believe the rise is temporary
While it is highlighted that it has recovered from low levels, the authors predict that this could be a ‘temporary surge.’ Bitcoin faces criticism for structural issues and has a history of price manipulation:
“The manipulation continuing in a market without regulation, supervision, or fair value, increasing demand for the ‘currency of illicit funds,’ and deficiencies in authorities’ decisions and measures.”
The report suggests that Bitcoin should be subject to strong regulatory intervention until its ‘practical banning.’ It emphasizes the importance of authorities being vigilant to protect society from money laundering, cyber and other crimes, financial losses for less financially educated individuals, and widespread environmental damage, urging them to fulfill this task that they have not yet undertaken.
