Two economists from the European Central Bank have once again targeted Bitcoin, describing it as a vehicle for criminals, devoid of intrinsic value, and a cause of societal impoverishment. In his article for finews.first, Leon Curti explains why these claims bear no relation to reality.
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In a 29-page report published in the second half of October 2024, Ulrich Bindseil, Director General for Market Infrastructure and Payments at the European Central Bank (ECB), and his colleague Jürgen Schaaf argued that a continually rising Bitcoin price impoverishes society. To mitigate potential harm, they suggest banning digital assets. However, the ECB economists’ reasoning contains questionable gaps.
Bindseil and Schaaf open their paper with one of the oldest and easiest-to-debunk myths about digital assets: that Bitcoin has never been used for meaningful legal transactions in the real world. They cite a 2022 article of their own, which predicted Bitcoin’s «disappearance into irrelevance».
According to their argument, almost exclusively criminals use Bitcoin. They claim cryptocurrencies remain the financial product of choice for fraudsters, lawbreakers, and criminals globally, citing its use in tax evasion, fraud, ransomware attacks, sanctions evasion, terrorism financing, drug trafficking, and money laundering. The authors deny that Bitcoin has any other applications.
«Bitcoin is unsuitable as a payment vehicle for crimes»
Fortunately, crypto transactions occur on a publicly visible ledger – the blockchain. The history of accounts linked to illegal activity can be fully traced. Analytics firms like «Chainalysis» publish annual estimates of the crypto volumes associated with criminal activity. Unsurprisingly, the facts don’t support the ECB economists.
In 2024, only 0.34 percent of the total blockchain volume was linked to crime. By comparison, the British magazine «The Economist» estimates that $500 billion to $1.5 trillion is laundered annually through traditional banks – a figure roughly equivalent to Bitcoin’s entire market capitalization. The blockchain leaves an eternal «paper trail» and is therefore unsuitable as a payment method for crime.
Another familiar critique follows: despite its significant market capitalization, Bitcoin has no intrinsic value. «Many economists consider Bitcoin’s fair value to be zero». Consequently, the cryptocurrency is alleged to be in a massive bubble.
«In reality, ‹fair value› is an empty phrase»
In truth, ‹fair value› is nothing more than an empty phrase. Gold derives its value from the same attributes that historically made it a successful currency: durability, divisibility, scarcity, and stability. Bitcoin meets these criteria, with additional advantages due to its digital nature. The euro, by contrast, also lacks intrinsic value and loses purchasing power every year, unlike gold or Bitcoin.
The ECB economists conclude with a bizarre assertion: since Bitcoin does not increase the productive capacity of the economy, a hypothetical scenario of continuously rising prices would lead to wealth redistribution. Bitcoin holders would grow wealthier while non-holders would grow poorer. «It’s like filling a bucket by emptying water from another bucket».
Of course, this concept could be applied to any asset. The claim implies that a rise in gold prices enriches holders at the expense of non-holders. This argument overlooks the fundamental value of an inflation-resistant asset as a safeguard against devaluation. The real losers are the people in the eurozone, whose money can purchase fewer and fewer goods.
Leon Curti is Head of Research at Digital Asset Solutions, which supports and advises financial institutions on education, research, and asset management in the digital assets space.
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