Bitcoin-hating European Central Bank isn't doing much to stop scammers
FTX co-founder Sam Bankman-Fried was sentenced to 25 years in jail. Apple co-founder Steve Wozniak just won an appeal against YouTube and the use of his likeness in promoting cryptocurrency scams on the site. Crypto scammers (or the platforms they use) are increasingly getting caught and held accountable for their actions. Cryptocurrency is mainstream, meaning mainstream attention to coins, tokens, or platforms that seem “too good to be true” is met with widespread awareness that they are, indeed, too good to be true.
Unfortunately, as cryptocurrency regains popularity, more scams will appear. And one popular regulatory approach — criticizing Bitcoin (BTC) — is only serving to push more people into criminals’ clutches. I have personally been impersonated on social media due to my association with blockchain, and the criminals behind it attempted to swindle funds from my followers and friends. Despite filing police reports and injunctions, no progress has been made in catching them.
There are plenty of problems in cryptocurrency that are well worth attacking. But from Europe to the United States, regulators fight the same straw “bogeyman” of Bitcoin. The European Central Bank’s latest comments serve as an example: "Bitcoin has failed on the promise to be a global decentralized digital currency and is still hardly used for legitimate transfer,” ECB officials Ulrich Bindseil and Jürgen Schaaf wrote in a post for the ECB’s blog.
Related: The Runes protocol will ignite a new season for Bitcoin after the halving
The remarks gave a platform to several thoroughly debunked myths about Bitcoin’s “criminality.” There were plenty of missteps contained in Bindseil and Schaaf’s post, but six areas were especially offensive for their lack of context.
First, the pair claimed that the Security and Exchange Commission’s approval of Bitcoin spot ETFs would not make investing in Bitcoin safe. No investment is indeed entirely safe. No listed asset on any European exchange is any safer than a spot Bitcoin ETF, but the legitimacy that comes with the institutional validation is borne from its regulation. The duo’s criticism lacked that context.
European Central Bank (ECB): "ETF approval for Bitcoin the naked emperor's new clothes."
— Gabor Gurbacs (@gaborgurbacs) February 22, 2024
Also the ECB, fully clothed: pic.twitter.com/4RXIsYXXwd
They also claimed that Bitcoin’s fair value was “zero” because it didn’t fulfill its original promise as a global decentralized digital currency, and said it failed to meet the standard of a “productive asset.” This is akin to claiming gold has no fair value because it is no longer used in coins. Gold still has value, however. So does Bitcoin. While it isn’t used for day-to-day purchases, its scarcity has made it a helpful inflation hedge against fiat currencies. Context of what makes an asset valuable is critical here, and it is missing.
The authors went on to complain about the supposed pollution created by Bitcoin mining without the appropriate context. (Namely: How much electricity is used by Bitcoin’s alternative — Europe’s digital banking system?) Likewise, they neglected to mention that Bitcoin miners have significantly adjusted operations to renewable energy sources, while other blockchains have reduced energy consumption by nearly 100% by switching to proof of work (if they weren’t already carbon neutral — or negative).
They also claimed that Bitcoin shouldn’t be trusted because it is used for criminal activities such as money laundering and terrorism. That is sometimes true — we’ve already seen one British woman arrested this year for her role in laundering money for a criminal organization, in part using Bitcoin. However, She was caught because of Bitcoin’s transparency. Eight years ago, we even proved that you could assign an identity to thousands of Bitcoin addresses linked to illicit activities. This is much harder to do with cash, which remains the main and preferred means of payment for money laundering, according to the U.S. Treasury Department.
Ironically, the two final and most misleading claims are about regulators' role in markets. They claimed that Bitcoin’s price is subject to manipulation, and its market cap and price indicate a speculative bubble. Price manipulation is a recurring concern in many markets — the European Commission handed out fines totalling more than 1 billion euros to banks that manipulated the foreign exchange market between 2007 and 2013, and a new $3.5 billion lawsuit filed last year in the United Kingdom alleges the same foreign exchange price rigging. Nothing like this has ever been witnessed with Bitcoin. (Or, if it has, we’d welcome the ECB and other agencies to take action).
Nobel Laureate Robert Shiller, known for his work on bubbles and market dynamics, argues that speculative bubbles do not just signify market irrationality but can also reflect a new technology. In other words, they are behaviors that reflect a market’s attempt to price a novel asset class. Again, this historical and comparative context was missing in Bindseil and Schaaf’s remarks.
Finally, they claimed that authorities have failed to regulate Bitcoin, leading to misconceptions and potential harm. To that, we point to the European Union’s MiCA law and the numerous global sandboxes for cryptocurrency exploration. This simply is not true and takes us back to the first issue: The approval of Bitcoin spot ETFs is also a form of regulation.
Related: Biden is asking Congress to kill the American Bitcoin mining industry
Is it a coincidence that these remarks follow growing questions from European consumers about the U.S. Bitcoin ETFs? Or the rising price of Bitcoin compared to other traditional assets and currencies? No, it is not. Therefore, it stands to reason that any regulator choosing these outdated reasons without doing their own research plays a different strategy game.
Regulators that choose to attack Bitcoin instead of the other valid targets are either intent on having continued ignorance of the sector (an especially large problem since the European Central Bank is designing the digital euro and should be mimicking the security and success of an asset like bitcoin); or it is an intentional choice to try to keep some consumers and businesses out of cryptocurrencies. Neither of these brings confidence in their technological abilities, but more importantly, neither approach gives their citizens what they need to be vigilant against scammers.
Citizens (from consumers to business owners) need a balanced voice from their regulators that meets them where they are: Interested in exploring digital assets. A regulatory approach that emphasizes investment risk while recognising the attractiveness of the innovation of these systems is much more realistic. An approach that speaks to the potential, challenges and possible setbacks of these new assets, which gives consumers the wide view that they need to evaluate whether a YouTuber, social media advertisement, or even an offering from their brokerage is right for them.
Dismissing the entire sector through an attack on a valuable and resilient asset is like using Bitcoin as a hook to reel you into a video about a tokenomics-based Ponzi scheme — misleading.
Dr. Paolo Tasca is a guest author for Cointelegraph, a professor and an economist. He founded two blockchain organizations: The University College London Centre for Blockchain Technologies (UCL) and the Distributed Ledger Technology Science Foundation (DSF).He advises several organizations, including Ripple, INATBA, and the International Organization for Standardization (ISO), among others. He has also consulted and worked with the United Nations, the European Parliament, the FED Cleveland, the European Central Bank, the central banks of Italy, Chile, Brazil, Colombia and Canada, and Nexo.He previously served as the lead economist for digital currencies and P2P financial systems at the German Central Bank (Deutsche Bundesbank).This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
