Key takeaways:
- Last week, the European Central Bank (ECB) published a blog post criticizing Bitcoin
- The ECB wrote that crypto regulation might be mistaken for approval that legitimizes crypto assets
- Called Bitcoin’s last stand, the post failed to acknowledge the nascent state of blockchain technology, and scalability-focused solutions like the Lightning Network
ECB’s criticism fails to acknowledge constantly evolving tech and solutions like the Lightning Network
The European Central Bank (ECB) recently published a blog post warning of the potential risks of Bitcoin and other cryptocurrencies, called Bitcoin’s last stand.
Many experts, like research analyst at CoinDesk George Kaloudis, are not convinced by the pessimistic outlook outlined in the ECB’s writings. The blog post argues that Bitcoin (BTC) is a “toxic” form of currency that fails to meet the criteria of a successful currency. According to the post, Bitcoin is subject to extreme volatility, illiquidity, and a lack of trust and transparency.
The post claims that Bitcoin does not serve as a store of value or a medium of exchange. Despite the ECB’s warnings, many experts remain unconvinced. They argue that the post fails to take into account the potential benefits of Bitcoin, such as its decentralized nature, its ability to facilitate cross-border payments, and its potential to revolutionize the finance industry.
Moreover, the post fails to recognize that Bitcoin is still in its nascent stage, and that its underlying technology is constantly evolving. In fact, many of the issues the ECB cited, like problems with scalability and slow transaction processing speeds, have been addressed by recent technological advancements, such as the Lightning Network.
Central banks are against private cryptocurrencies like Bitcoin, but continue to champion CBDCs
Ultimately, the post is a reminder that the ECB remains skeptical of Bitcoin and other cryptocurrencies. The following excerpt summarizes the content of the blog post pretty well:
Bitcoin is … not suitable as an investment. It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold).
The ECB is not alone in its stance, as its central banking peers around the world have repeatedly taken jabs at Bitcoin over the years. Earlier this year, for instance, US Treasury Secretary Janet Yellen warned that Bitcoin is an “extremely inefficient” way to conduct monetary transactions, due to its reliance on blockchain technology and Proof-of-Work (PoW) consensus algorithm.
Interestingly, when asked about central bank digital currencies (CBDCs), Yellen said that they “could result in faster, safer and cheaper payments.” CBDCs are effectively fiat currencies, like USD, GBP, and CNY, issued on the blockchain. Virtually all major countries are working on CBDCs, including the United States, China, India, the United Kingdom, and the member states of the European Union.
