The European Central Bank (ECB) has released its strongest bearish statement on crypto to date. In a blog post on its website, the bank chastises the EU Commission for legitimizing the industry with new regulations and predicts the death of bitcoin.
Protos has previously reported that, when it comes to crypto, there are very strong divergences between central bankers and legislators. For example, the Bank of International Settlements takes a very strong position against the enabling and legitimization of stablecoins.
The ECB itself has also previously warned that the collapse of major stablecoins could trigger financial contagion. Now the bank is going even further, declaring that bitcoin is dead and claiming that its recent price stabilization is only a last gasp before it slips into “irrelevance.”
Earlier this year, the European Commission presented a comprehensive framework called Markets In Crypto-Assets (MICA) to the European Parliament. The framework will force stablecoin issuers to hold 1:1 currency reserves and will also highly regulate exchanges. Market manipulation will not be allowed and exchanges won’t be able to use clients’ funds to gamble on markets.
The idea is to produce a framework for crypto that is as stringent as those governing the already highly-regulated financial services sector. However, the ECB is concerned that MICA may contribute to making bitcoin and crypto more respectable and more legitimate.
The ECB has reiterated that bitcoin is mostly used for speculation and not for payments and that its price rises are only due to the fact that it has gone through a speculative bubble that is now popping. The ECB also claims that bitcoin has no use or value and implied that the currency’s intrinsic value is, in fact, zero.
It also warned banks that offering bitcoin-related services carries a strong reputational risk.
Earlier this month, ECB chief Christine Lagarde claimed that crypto and private payment systems operating outside the EU can disrupt payment markets by making it more confusing and difficult for customers while increasing instability.
She also endorsed the ongoing central banks’ central bank digital currency (CBDC) project, however, the ECB is still behind in issuing a Euro CBDC. The decisions by the ECB on the Euro’s CBDC are set to be concluded in September 2023, but its legislative framework and implementation would still take years.
Meanwhile, Lagarde would have to contend with potential instability and disruption in the payments systems market — unless crypto dies out completely.
For the record, this isn’t the first time that bitcoin has been declared dead. Since 2010, there have been at least 466 obituaries to bitcoin published in the press. The question is, is it different this time around or is the ECB’s warning just another buy signal?