Bitcoin Failed as a Global Digital Currency and Holds No Fair Value, claims European Central Bank
In Brief
European Central Bank (ECB) asserts Bitcoin has zero net fair value and warned against its pitfalls to less financially knowledged investors.
The European Central Bank (ECB) recently criticized Bitcoin in a blog post, despite the cryptocurrency‘s recent surge in value and increasing institutional adoption following the approval of spot Bitcoin ETFs in the United States and the upcoming halving event.
The ECB strongly rebuked the notion that these developments signify a victory for Bitcoin. Additionally, Bitcoin was slammed for its lack of cash flows, dividends, productivity, and social benefits compared to traditional assets like real estate, equities, commodities, and gold. The ECB emphasized zero net fair value of Bitcoin and warned of the pitfalls for less financially knowledgeable retail investors driven by fear of missing out.
They added that cryptocurrency is prone to a cyclic pattern of booms and busts, which could lead to significant collateral damage.
Moreover, ECB underscored Bitcoin’s minimal use as a medium of exchange outside of illicit activities on the darknet, labeling it the “currency of crime: financing evil” for its role in facilitating criminal and terrorist financing. Despite the full endorsement of the El Salvador government, which granted Bitcoin legal tender status and distributed free satoshis (sats) to its citizens, the ECB noted the lack of positive changes in Bitcoin’s network usage.
Bitcoin Remains the Top Choice for Money Laundering
ECB reiterated longstanding criticisms of Bitcoin’s utility as a currency, noting its limited usage outside of illicit activities on the darknet. Mentioning a Chainanalysis report, ECB stated that Bitcoin remains top choice for money laundering in the digital world, with illegal addresses transferring $23.8 billion in crypto in 2022, marking a 68.0% increase from the previous year.
“Approximately half of these funds were funneled through mainstream exchanges, which, despite having compliance measures, serve as conduits for converting illicit crypto into cash,” it added.
The ECB criticized regulators for failing to effectively address Bitcoin’s negative social impacts, including its use in financing criminal activities and environmental damage. It noted compromises made by regulators due to pressure from lobbyists and social media campaigns, which may give a false impression of approval for Bitcoin investments.
Additionally, the ECB raised concerns about the environmental impact of Bitcoin mining, likening its energy consumption to that of entire countries. It noted that rising Bitcoin prices incentivize higher energy consumption by mining firms, exacerbating environmental concerns.
The ECB cautioned against using Bitcoin’s price level as an indicator of sustainability, emphasizing the lack of fundamental economic data and fair value for Bitcoin. Authorities were urged to protect society from various risks associated with Bitcoin, including financial losses for less educated investors, money laundering, cybercrimes and environmental damage.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
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Kumar is an experienced Tech Journalist with a specialization in the dynamic intersections of AI/ML, marketing technology, and emerging fields such as crypto, blockchain, and NFTs. With over 3 years of experience in the industry, Kumar has established a proven track record in crafting compelling narratives, conducting insightful interviews, and delivering comprehensive insights. Kumar's expertise lies in producing high-impact content, including articles, reports, and research publications for prominent industry platforms. With a unique skill set that combines technical knowledge and storytelling, Kumar excels at communicating complex technological concepts to diverse audiences in a clear and engaging manner.
