ECB reports Bitcoin’s last stand

The European Central Bank put out a blog yesterday heavily maligning Bitcoin. Rarely being used for legal transactions was one its allegations.

The European Central Bank (ECB) published a blog on Wednesday where it said that the number one cryptocurrency was on the “road to irrelevance”. The report pulled no punches and was scathing of Bitcoin.

Bitcoin is rarely used for legal transactions 

Authors Ulrich Bindseil and Jürgen Schaaf included the above subtitle in their report but then made absolutely no reference at all to it within. There was no on-chain data or links to it in the text so it was left to the reader to believe the claim or not.

According to blockchain analytics firm Chainalysis, illegal activity on the Bitcoin blockchain made up only 0.15% of the total transaction volume for the year 2021, which is the lowest it has ever been. Therefore the ECB author’s use of such a subtitle might be taken as misleading in the extreme.

The illegal transactions section of the ECB blog article was mainly filled with making the case that in the author’s view, the value of Bitcoin was based purely on speculation, and that speculative bubbles were caused by new waves of investors coming in.

Regulation can be misunderstood as approval

The blog authors wanted to leave no doubt that regulation, when it arrives, does not give crypto any more legitimacy. They deplored the fact that large investors were funding lobbyists, who were in their turn trying to influence lawmakers.

The fact that this is how the legislative process works for every single new piece of legislation, crypto or not, did not appear to make a difference. The slow speed of regulation, and the inability for all jurisdictions to agree on it was another area that the ECB complained about.

That Bitcoin was perceived by the ECB to be an “unprecedented polluter”, was also shoe-horned into the regulation section. The claim was made that Bitcoin “consumes energy on the scale of entire economies”. 

However, the comparisons did not include the banking industry. In an article from 2021, Bitcoin Magazine estimated that Bitcoin emitted 70 million Mt of CO2 annually, while bank branches and ATMs produced 400 million Mt each year.

Promoting Bitcoin is a reputational risk for banks

To end its blog article the ECB posited that Bitcoin was not suitable for payments nor as an investment, and therefore should not be seen as legitimised by regulation.

Those in the financial industry were warned as to the reputational damage they could incur by promoting Bitcoin investments for short-term profits. It was felt that as Bitcoin will make further losses, the negative impact on banks that supported cryptocurrency might tarnish the whole banking industry.

Of course, it might be wondered just how much more negativity could even be inflicted on the banking industry, given that it has been riddled with fraud and manipulation over many decades.

Just for the year 2020 many hundreds of millions of dollars were paid in fines for misconduct by some of the biggest banks and financial institutions. In that year Wells Fargo alone had to pay $3 billion in fines for “historic account fraud stretching back years.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.