Bitcoin's Last Stand: ECB Staffers Say the Crypto Is on 'Road to Irrelevance'

Crypto regulation can be misunderstood as approval, the officials at the European Central Bank said.

AccessTimeIconNov 30, 2022 at 1:21 p.m. UTC
Updated Nov 30, 2022 at 9:51 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Bitcoin (BTC) was created nearly 15 years ago as a way to improve upon or replace the existing monetary system, but those hopes haven't panned out, writes Ulrich Bindseil, director general of market Infrastructure and payments at the European Central Bank.

"Bitcoin has never been used to any significant extent for legal real-world transactions," he and adviser Jürgen Schaff wrote in a blog post titled "Bitcoin's Last Stand" on Wednesday. While bulls seem heartened by bitcoin's ability to hold the $16,000-$20,000 range amid the crypto collapse, Bindseil and Schaff called the current price action "an artificially induced last gasp before the road to irrelevance."

The "conceptual design and technological shortcomings," of bitcoin make it unsuitable for payments, and since the crypto does not generate cash flows or dividends, it's a poor investment as well, they argued.

Trotting out the well-worn Ponzi argument, the two claimed bitcoin's value is reliant on continuing waves of fresh money from new investors, and said "big bitcoin investors have the strongest incentives to keep the euphoria going."

Don't misunderstand regulation as approval, the two warned, criticizing the fast-growing crypto lobbying class as putting forth the idea that crypto is just another asset class worthy of a spot in investor portfolios.

The ECB is not known for championing crypto but the bank's critical assessment of bitcoin came with a warning about how the industry is regulated. In fact, lawmakers and regulators around the world are scrutinizing their approach to supervising crypto following the collapse of crypto exchange FTX, which operated across multiple jurisdictions with little accountability.

On Wednesday, Singapore's financial regulators defended their standards of supervision to lawmakers and explained why a state-owned fund was invested in the fallen crypto enterprise.

Meanwhile, in the European Union – which recently agreed on the text for its sweeping Markets in Crypto Assets (MiCA) regulation – lawmakers expressed concerns about the effectiveness of the rules, and if they'd be tough enough to prevent future collapses.

Bindseil and Schaaf closed out their essay by criticizing the energy-intensive Bitcoin network as "an unprecedented polluter," and warned banks of likely "reputational damage" from promoting bitcoin.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about