European Central Bank’s Ulrich Bindseil Says Bitcoin ‘Should Not Be Legitimised’

European Central Bank’s Ulrich Bindseil Says Bitcoin ‘Should Not Be Legitimised’

November 30, 2022

On Wednesday (30 November 2022), Ulrich Bindseil, who is Director General for Market Infrastructure and Payments (DG-MIP) at the European Central Bank (ECB), shared his thoughts on Bitcoin.

The ECB is “the central bank of the European Union countries which use the euro.” Its main purpose is “to maintain price stability”, which it tries to do by “making sure that inflation remains low, stable and predictable.”

Ulrich Bindseil’s comments about Bitcoin were made in a blog post — published earlier today — jointly written with Jürgen Schaaf, who is an advisor to the Senior Management of the Market Infrastructure and payments business area of the ECB.

Bindseil and Schaaf wrote:

Bitcoin was created to overcome the existing monetary and financial system. In 2008, the pseudonymous Satoshi Nakamoto published the concept. Since then, Bitcoin has been marketed as a global decentralised digital currency. However, Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment: real Bitcoin transactions are cumbersome, slow and expensive. Bitcoin has never been used to any significant extent for legal real-world transactions…

Large investors also fund lobbyists who push their case with lawmakers and regulators. In the US alone, the number of crypto lobbyists has almost tripled from 115 in 2018 to 320 in 2021. Their names sometimes read like a who’s who of US regulators…

But lobbying activities need a sounding board to have an impact. Indeed, lawmakers have sometimes facilitated the influx of funds by supporting the supposed merits of Bitcoin and offering regulation that gave the impression that crypto assets are just another asset class. Yet the risks of crypto assets are undisputed among regulators. In July, the Financial Stability Board (FSB) called for crypto assets and markets to be subject to effective regulation and supervision commensurate with the risks they pose – along the doctrine of ‘same risk, same regulation’…

Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised. Similarly, the financial industry should be wary of the long-term damage of promoting Bitcoin investments – despite short-term profits they could make (even without their skin in the game). The negative impact on customer relations and the reputational damage to the entire industry could be enormous once Bitcoin investors will have made further losses.

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