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Bitcoin ‘rarely’ used for legal transactions, on ‘road to irrelevance’, European Central Bank officials say londonbusinessblog.com

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European Central Bank officials claimed on Wednesday that bitcoin is “rarely used for legal transactions,” is fueled by speculation, and recent erosion in its value indicates it is on the “road to irrelevance,” in a series of stern criticisms ( devoid of strong data points) of the cryptocurrency industry as they urged regulators not to lend legitimacy to digital tokens in the name of innovation.

The value of bitcoin that recently found stability around $20,000 was “an artificially induced last gasp before the road to irrelevance – and this was foreseeable even before FTX went bankrupt and sent bitcoin price well below $16,000,” wrote Ulrich Bindseil and Jürgen Schaaf Aan ECB blog.

The central bankers argue that bitcoin’s conceptual design and “technological flaws” 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 transactions in the real world,” they wrote.

Bitcoin also does not generate cash flow (like real estate) or dividends (like stocks), can’t be used productively (like commodities), or provide social benefits (like gold). Thus, the market valuation of bitcoin is based purely on speculation,” they wrote.

The bankers’ comments have drawn criticism from several tech-savvy enthusiasts. In a series of tweetsinvestor and commentator Joel John pointed to a security audit firm Chainalysis report that concludes that only 0.15% of crypto transactions were related to criminal activity, compared to 5% for the traditional currency.

“I’m not suggesting that crypto doesn’t have funny actors. We had our share of scrupulous players and the regulators are a critical part of the mix. But putting a little more effort into covering the industry can go a long way for us. Bias is easy, but it doesn’t make progress,” John wrote.

The central bank officials also claimed that bitcoin has “repeatedly benefited from waves of new investors”, “manipulations by individual exchanges or stablecoin providers”, but these tactics cannot provide any stabilizing factors.

The bankers say crypto companies have funded lobbyists to influence legislators and regulators, but their efforts are proving unsuccessful because even lobbying activities “need a sounding board to make an impact.”

“The current regulation of cryptocurrencies is partly shaped by misconceptions. The conviction that innovation must be given room at all costs remains stubborn. Since bitcoin is based on a new technology – DLT / Blockchain – it would have high transformation potential. First, these technologies have so far created limited value for society – no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it,” they added.

Several central banks around the world have expressed concern over cryptocurrency adoption (and the proliferation of their trade) in recent quarters. Shaktikanta Das, the governor of the Reserve Bank of India, said earlier this year that cryptocurrency has no underlying asset and is not even a tulip, referring to the Dutch tulip bulb market bubble from the 17th century. The South Asian country is launching a retail digital currency pilot on Thursday, which aims to protect citizens from the volatility of private cryptocurrencies, among other things.


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