The European Central Bank (ECB) remains skeptical of Bitcoin despite the approval of eleven spot BTC Exchange-Traded Fund (ETF) applications by the United States Securities and Exchange Commission (SEC) on January 10, likening them to “naked emperor’s new clothes.”
On February 22nd, Ulrich Bindseil, the Director General overseeing the Market Infrastructure and Payments division at the ECB, along with Jürgen Schaaf, an advisor within the same division, penned an article featured on the ECB’s official blog.
ECB on Bitcoin ETFs: “Naked Emperor’s New Clothes”
The title of the blog post by ECB is “ETF approval for Bitcoin—the naked emperor’s new clothes.” The officials have stated that the approval from the US SEC for spot BTC ETFs does not prove that the leading digital asset is safe for investments.
Additionally, the ECB is not convinced that the succeeding rally in the price of bitcoin is “proof of an unstoppable triumph.” The central bankers have emphasized that, as per their belief, the price of BTC is still zero.
The post states:
“For society, a renewed boom-bust cycle of Bitcoin is a dire perspective. And the collateral damage will be massive, including the environmental damage and the ultimate redistribution of wealth at the expense of the less sophisticated.”
BTC is Not a Global Decentralized Digital Currency
Bindseil and Schaaf contend that Bitcoin has fallen short of its initial vision as a universal, decentralized digital currency.
Their argument extends to the assertion that Bitcoin, deemed inadequate as an investment vehicle, lacks the capacity to generate cash flow or dividends, remains unproductive in practical use, and ultimately fails to provide any tangible social benefit or subjective appreciation based on exceptional capabilities. The bankers believe that the rally in the price is a “dead cat bounce”, and might have been driven by the approval of spot ETFs, but the price surge could turn out to be “a flash in the pan.”
The report adds:
“There is no “proof-of-price” in a speculative bubble. Instead, a reflation of the speculative bubble shows the effectiveness of the Bitcoin lobby,”
The ECB still believes that its job to control Bitcoin is not complete yet, and the institution aims to maintain vigilance and safeguard society against the perils of money laundering, cybercrime, and financial losses, especially for those less informed about digital assets. They also seek to address the environmental damage done by Bitcoin.
Related reading: Bitcoin’s Net-Positive Environmental Impact: List of Recent Studies
No Impact on Real World Economy
As reported earlier by Bitcoinnews in May 2019, the ECB published a report titled “Crypto-Assets: Implications for Financial Stability, Monetary Policy, and Payments and Market Infrastructures” to study the potential impact of digital assets on monetary policy and economic developments.
The institution said that virtual currencies do not have any impact on the real world economy, adding that they can only impact economic developments if they become a credible substitute for cash and transactions. Digital assets are “very, very risky assets,” noted Mario Draghi, who served as the President of the European Bank at that time.
The ECB is also currently focused on the development of a Central Bank Digital Currency (CBDC), which it believes will strengthen and stabilize the region’s economy.
