Vitalik Buterin Calls Saylor’s Bitcoin Custody Ideas “Batshit Insane”

Saylor’s comments attracted criticism from well known people in the crypto space like Vitalik Buterin and Erik Voorhees, who argue that his stance undermines the decentralized ethos of crypto. Meanwhile, the European Central Bank (ECB) is also under fire for a report criticizing Bitcoin. Crypto academics claim that the report is biased and completely ignores the crypto’s technological  advantages and utility. Tether CEO Paolo Ardoino recently voiced his concerns about the US falling behind in crypto regulation, and called for more sensible policies to support innovation and protect users.

MicroStrategy founder Michael Saylor recently faced a lot of backlash from the crypto community after suggesting that Bitcoin holders should rather use large banks to custody their assets. This stance rubbed many, especially Ethereum co-founder Vitalik Buterin , the wrong way. Buterin called Saylor’s comments “batshit insane” in response to an Oct. 22 post on X by Jameson Lopp, who is the chief security officer of Bitcoin custody firm Casa. 

Saylor shared his thoughts on Bitcoin custody on Oct. 21, and it was in stark contrast to his previous endorsement of self-custody. He now believes that “too big to fail” banks should be relied upon for Bitcoin storage. 

Buterin completely disagrees with Saylor, and stated that Saylor’s position leaned towards regulatory capture that favors large investment firms like BlackRock and Fidelity to safeguard the asset while operating with regulatory protection. He is also quite concerned about the fact that this approach completely contradicts the fundamental principles of crypto, and warned that the strategy’s historical problems could undermine what the movement actually stands for.

Saylor also targeted “crypto-anarchists” during his discussion with financial markets journalist Madison Reidy. Additionally, he warned that entities that are unregulated by the government and that do not comply with tax and reporting requirements could elevate the risk of asset seizure. 

The opposition towards Saylor’s comments is still growing. James Lopp argued that self-custody is still very much a critical practice for individual Bitcoin holders, and is also very important when it comes to the resilience and the development of the network. Similarly, the founder of ShapeShift, Erik Voorhees, criticized Saylor’s dismissal of self-custody as undermining a foundational aspect of Bitcoin that serves as a safeguard against centralization and corruption. 

The controversy surrounding Saylor’s view isn’t new, as he supported centralized custodians for crypto assets in a 2022 interview with Blockware head analyst Joe Burnett. The timing of that interview was very eye-catching as it took place very shortly after the collapse of FTX. This interview also attracted scrutiny, and was revisited in a Blockware post on Oct. 22. 

Crypto Academics Slam ECB Bitcoin Report

Michael Saylor is not the only one getting slammed for his opinions on Bitcoin. A controversial paper that was  published by the European Central Bank (ECB) earlier this month came very close to labeling Bitcoin as a Ponzi scheme, and has faced serious backlash from a group of crypto academics. 

The original paper was released on Oct. 12 by ECB officials Ulrich Bindseil and Jürgen Schaaf. It criticized Bitcoin’s volatility, lack of productive contribution, and concentration of wealth, which very quickly attracted some scathing responses from the crypto community.

In the response to the paper that was issued on Oct. 22, Murray Rudd from the Satoshi Action Fund, along with co-authors Allen Farrington of Axiom Capital, Freddie New from Bitcoin Policy UK, and Dennis Porter of the Satoshi Action Fund, argued that the ECB paper suffered from “methodological weaknesses and personal or institutional biases.” They claimed that these flaws undermined its academic rigor and failed to offer a credible analysis of Bitcoin’s utility and future prospects.

The ECB paper’s negative assessment of Bitcoin included skepticism about its long-term viability and societal impact. It also favorably positioned central bank digital currencies (CBDCs) as better alternatives for modern financial systems. 

Rudd is convinced that the ECB’s arguments were fundamentally flawed, and the authors misinterpreted Bitcoin’s primary purpose. He suggested they inaccurately claimed Bitcoin shifted from a payment method to an investment vehicle and completely misunderstood its technological principles, like proof-of-work and decentralization.

The response also criticized the ECB paper for focusing more on Bitcoin’s early limitations without really recognizing improvements that were made in scalability and efficiency. Additionally, it addressed claims about wealth concentration by pointing out that many large Bitcoin wallets belong to exchanges holding funds on behalf of millions of users. Rudd also argued that the paper overlooked Bitcoin’s utility as a store of value and its network effects while mischaracterizing the asset’s volatility, which is actually very typical of early-stage technological adoption.

The response went on to challenge the ECB’s critique of Bitcoin’s wealth distribution, and suggested that it ignored broader issues like inflation in traditional financial systems. Rudd specifically mentioned the declining purchasing power of the US dollar as an example to prove some of the flaws in the ECB’s argument.

Decline in US dollar purchasing power since 2000 (Source: The Bitcoin Distillery)

A huge conflict of interest was also pointed out in the response, as the ECB authors are involved in developing a digital euro, which is a central bank digital currency. It suggested that this involvement could have influenced their portrayal of Bitcoin as an inferior and speculative asset. Additionally, it accused the ECB of ignoring Bitcoin’s benefits in areas like financial inclusion, cross-border payments, utility in countries with unstable currencies, and technological advancements in energy efficiency and power grid stability.

In response to the rebuttal, Bindseil stated that the critique seems to be a broad defense of Bitcoin rather than a targeted response to their paper. Schaaf also brushed off the rebuttal’s claims by stating that the ECB paper did not mention CBDCs, contrary to what the rebuttal suggested. 

US Lagging on Crypto Laws

Paolo Ardoino, the CEO of Tether, is concerned that the United States is lagging in crypto regulation. At the DC Fintech Week conference on Oct. 22, Ardoino shared that the US historically led technological development, but is now falling behind in regulating the crypto sector. However, he is hopeful that more concrete crypto-specific regulations could emerge after the upcoming elections.

The US crypto industry has been pushing for dedicated regulations as current finance laws do not accommodate the unique aspects of digital assets. The lack of clear regulatory guidance is also considered to be one of the main reasons for some crypto companies leaving the country. 

Ardoino speaking at DC Fintech Week (Source: YouTube)

Ardoino firmly believes that there is a serious need for “sensible” crypto and stablecoin regulations that protect end-users, and stated that the global regulatory landscape very often looks to the US for guidance.

The crypto industry has made a huge effort to influence outcomes in the upcoming US election. In fact, it spent more than $130 million to support candidates, primarily Republicans in key Senate and House races. Republican candidate Donald Trump openly advocated for crypto-friendly policies, while Democratic rival Kamala Harris recently voiced her own support for digital assets. 

Ardoino suggested that new regulatory frameworks could also help Tether and other stablecoins to continue to serve as essential financial tools for millions of people lacking access to traditional financial services available in the US and Europe. Tether has faced a lot of scrutiny from US regulators, including a $41 million fine from the Commodity Futures Trading Commission in 2021 over misleading claims about the assets backing its USDT token. Lawmakers also urged the Justice Department to investigate Tether’s alleged involvement in illicit finance.