Bitcoin ‘rarely’ used for legal transactions, down ‘road of irrelevance’, say European Central Bank officials • TechCrunch

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European Central Bank officials alleged 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 harsh criticisms (lacking solid data points) of the cryptocurrency industry as they urged regulators not to legitimize digital tokens in the name of innovation.

The value of bitcoin which recently stabilized at around $20,000 was “an artificially induced last gasp before the path to irrelevance and this was already predictable before FTX went bankrupt and sent the price of bitcoin well below $16,000,” Ulrich Bindseil and Jrgen Schaaf wrote on ECB. Blog.

Central bankers argue that bitcoin’s conceptual design and technological shortcomings make it a questionable means of payment. Real bitcoin transactions are cumbersome, slow and expensive. Bitcoin has never been used in any meaningful way for legal real-world transactions, 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). The market valuation of bitcoin is therefore based solely on speculation, they wrote.

Parts of the bankers’ arguments lack solid data and seem fueled by irrational and emotional biases. Naturally, it drew criticism from several tech enthusiasts.

In a series of tweets, investor and commentator Joel John pointed to a report by security audit firm Chainalysis which concluded that only 0.15% of crypto transactions were linked to criminal activity, compared to 5% for traditional currency. .

“I don’t want to say that crypto doesn’t have fun players. We’ve had our share of scrupulous players and regulators are a crucial part of the mix. But a little more effort on how the industry is covered can go a long way. Bias is easy, but it does not lead to progress,” John wrote.

But this argument is flawed in the sense that as a technology becomes the norm, an increasing share of events will be related to it.

We no longer say “internet-related accident” or “mobile app-related suicide” – as terrible as the two events are.

— Joel John (@joel_john95) November 30, 2022

Central bank officials have also alleged that bitcoin has repeatedly benefited from waves of new investors and manipulation by individual exchanges or stablecoin providers, but these tactics are unable to provide stabilizing factors. .

Bankers say crypto firms have funded lobbyists to influence lawmakers and regulators, but their efforts are not successful because even lobbying activities need a sounding board to have an impact.

Current cryptocurrency regulation is partly shaped by misconceptions. The belief that space must be given to innovation at all costs persists stubbornly. Since bitcoin is based on a new technology – DLT/Blockchain – it is said to have high transformation potential. First, these technologies have so far created limited value for society, regardless of expectations for the future. Second, the use of a promising technology is not a sufficient condition for added value from a product based on it, they added.

Several central banks around the world have expressed concerns about cryptocurrency adoption (and the proliferation of their exchanges) in recent quarters. Shaktikanta Das, the Governor of the Reserve Bank of India, said earlier this year that the cryptocurrency had no underlying value and was not even a tulip, referring to the Dutch bulb market bubble. of 17th century tulips. The South Asian nation will launch a retail digital currency pilot project on Thursday, with which it aims, among other things, to protect citizens from the volatility of private cryptocurrencies.

Bindseil and Schaaf warned financial industry players — many of whom are high-profile backers of crypto firms — to be “wary of” long-term reputational damage “once bitcoin investors suffer new losses.

Goldman Sachs, Morgan Stanley, HSBC, Wells Fargo, Citigroup, Bank of America, Deutsche Bank, UBS, Commonwealth Bank of Australia, Bangkok Bank and Development Bank of Wales are among the banks that have backed one or more crypto firms, according to Web3 . Signals.

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