The ECB Is Declaring War on Bitcoin, and Latecomers Have Good Reason to Oppose It

Those who have been late to Bitcoin or don't own the coin have good reasons to oppose it and advocate legislation to protect themselves from its negative consequences of wealth redistribution, according to a recent analysis authored by ECB officials Ulrich Bindseil and Jürgen Schaff.

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ECB officials are arguing that those who joined the Bitcoin train late or who don’t own the coin have good reasons to oppose it and advocate for legislation that will protect them from the negative consequences of its wealth redistribution.

The officials, who earlier claimed that Bitcoin’s February price rally was driven by price manipulation, now claim that Bitcoin has shifted from its original vision as a decentralized payment system to primarily an investment asset.

This argument is supported by the growing mainstream narrative, pushed by high-profile figures like BlackRock CEO Larry Fink or Galaxy Digital’s founder Mike Novogratz, who view Bitcoin as a pure investment asset. Their perspective is that Bitcoin’s limited supply and growing demand will drive its price up, similarly to gold.

However, the officials are asserting that the popular belief among crypto supporters, which suggests that Bitcoin’s limited supply will ensure sustained price increases, is false.

“There are countless assets on earth with a limited or finite supply, and for none of them the notion that they can sustain an ever-increasing valuation over the long term, regardless of the services or benefits they provide to society, is particularly plausible,” the report reads.

“Proponents of the Bitcoin investment perspective ignore the fact that “scarcity” describes the relationship between supply and demand. A limited, finite supply does not equate to scarcity. In the context of Bitcoin with its limited and fixed supply the non-economic term “rarity” seems more appropriate. If supply is fixed, the price becomes exclusively dependent on demand. And if the demand were to disappear, the price would be zero,” it adds.

The officials are warning that even in a scenario where Bitcoin’s value continues to rise, it could lead to negative economic consequences if it’s not justified by the underlying fundamentals. They argue that Bitcoin doesn’t enhance the economy’s productive capacity, and any wealth generated by Bitcoin holders comes at the expense of others in society.

“This redistribution of wealth and purchasing power is unlikely to occur without detrimental consequences for society,” the report claims.

“Early adopters have a vested interest in promoting Bitcoin values to redistribute wealth and consumption from latecomers to themselves, maybe without being conscious of the redistributive nature of their vision,” it states.

“In any case current non-holders should realize that they have compelling reasons to oppose Bitcoin and advocate for legislation against it, aiming to prevent Bitcoin prices from rising or to see Bitcoin disappear altogether. Latecomers and non-holders and their political representatives should emphasize that the idea of Bitcoin as an investment relies on redistribution at their expense,” it adds.

The officials are also warning that failing to do so could lead to electoral outcomes favoring politicians who support pro-Bitcoin policies, which could exacerbate wealth inequality and societal divisions by promoting a system that benefits early adopters while disadvantaging latecomers and non-holders.

ECB Declaring War on Bitcoin?

This isn’t the first time that ECB officials have shown their skepticism towards Bitcoin. As Crypto Briefing reported, officials earlier likened the approval of US Bitcoin ETFs to the ‘Naked Emperor’s New Clothes.’

The ECB faced social backlash as soon as the paper surfaced. Wall Street veteran Max Keiser criticized the paper for making false claims about Bitcoin’s original purpose.

The @ecb makes a rookie mistake by claiming Bitcoin originated as a payment means. This is false. The word ‘Cash’ in the White Paper refers to money, as in Gold, not fiat currency. Bitcoin has always been digital Gold.

Satoshi makes this clear in subsequent posts & messages. pic.twitter.com/qEMhoNDWpE

— Max Keiser (@maxkeiser) October 19, 2024

Blockstream advisor Tuur Demeester, who first brought the paper to public attention, believes that the ECB’s paper is “a true declaration of war” and that authorities will use it to justify harsh taxes or bans on Bitcoin.