In response to the latest anti-Bitcoin paper by the European Central Bank (ECB), a new academic paper entitled “Challenging Bias in ECB Bitcoin Analysis” has been published. This paper, authored by Murray Rudd, along with co-authors Allen Farrington, Freddie Niu, and Dennis Porter, provides a comprehensive critique of a recent working paper by European Central Bank officials Ulrich Bindseil and Jürgen Schaaf.
Dennis Porter, CEO and founder of the Satoshi Action Fund, who started the paper a few days ago Announce The post on
The original ECB paper by Bindseil and Schaaf depicted Bitcoin as a speculative asset with limited intrinsic value and significant risk. She criticized Bitcoin’s volatility, lack of productive contribution, and concentration of wealth, while calling for central bank digital currencies (CBDCs) as a premium solution for modern financial systems, Bitcoinist reported.
This response systematically addresses and refutes the key assertions made by Bindsel and Schaff:
#1 The impact of political pressure on Bitcoin
Bendsel and Schaaf argue that industry pressures exert disproportionate influence, skewing regulatory policy in their favour. The appeal counters this by highlighting the decentralized nature of Bitcoin. “There is no CEO, legal or marketing departments, or lobbyists: it is a neutral, global, leaderless protocol. Bitcoin advocates typically operate without the institutional support enjoyed by the companies that dominate the cryptocurrency industry,” the authors write.
They point out that traditional financial institutions spend significantly more on lobbying than the emerging industry, noting that in 2023, cryptocurrency-related lobbying expenditures in the United States accounted for less than 1% of financial sector lobbying expenditures.
#2 Concentration of wealth
Addressing the claim that ownership is highly concentrated among a small number of large players, the response asserts that this view ignores the widespread dispersion of Bitcoin holdings. “Institutional and stock market portfolios represent the holdings of diversified investors rather than individual entities,” the authors explain. They point out that many of the largest wallets belong to exchanges like Coinbase and Binance, as well as ETF issuers like BlackRock and Fidelity, which hold bitcoin on behalf of millions of users.
The authors also challenge the idea that concentrating wealth in coins is inherently unjust. “They imply that any form of inequality is unjust, but fail to explain why this applies — Bitcoin’s free market has been available to everyone since its inception,” they wrote. “Unlike the vast majority of cryptocurrency tokens (“altcoins”), Bitcoin had a fair and public launch. There was no distribution of Bitcoin prior to launch, no “founder shares,” and no venture capital backers buying Bitcoin at reduced.”
#3 Lack of productive contribution
The ECB paper asserts that a rise in the price of Bitcoin creates positive consumption impacts for holders but does not increase overall productivity or economic growth. The appeal counters this by highlighting the important role Bitcoin plays in driving financial innovation and efficiency. They argue that “Bitcoin functions as a technological protocol, similar to the TCP/IP protocol that underpins the Internet, enabling the development of new financial services.”
The authors also emphasize the impact in developing regions, especially in the remittance market. “For countries that derive a large proportion of their GDP from remittances, reducing transaction costs could have huge impacts on the poorest households, who are traditionally excluded from banking services,” the report notes.
#4 Redistribution of Bitcoin Wealth
Bindsel and Schaaf point out that a rise in the price of Bitcoin leads to a redistribution of wealth, which benefits early adopters at the expense of non-adopters and latecomers. It is challenged that this argument ignores the voluntary nature of Bitcoin markets, where participants freely choose to enter based on their own assessment of the asset’s potential.
“Like early equity or venture capital investors, early adopters of Bitcoin took significant risks in exchange for high potential returns – an inherent characteristic of emerging technology markets,” they explain. They also highlight the broader effects of inflation, which redistributes wealth from savers to debt holders through inflationary policies. “Bitcoin’s fixed supply and deflationary properties resist this erosion, providing a long-term store of value,” they assert.
#5 Lack of intrinsic value
The ECB paper claims that Bitcoin lacks intrinsic value and cannot be priced using traditional asset valuation models. The appeal argues that this narrow definition ignores the role that scarcity, decentralization and utility as a store of value play in asset valuation.
“Bitcoin functions similarly to gold, providing an alternative store of value, especially in periods of monetary instability,” they say. They further assert that “their argument is fundamentally flawed: they claim that Bitcoin cannot be considered money because it cannot be valued as securities, when the reality is that it cannot be valued as securities precisely because it is money.”
#6 Bitcoin is a speculative bubble
Addressing the assertion that Bitcoin price movements indicate speculative bubbles, the response suggests that volatility is a feature of emerging technologies. They explained that “the rise in the price of Bitcoin is due to its scarcity, dependence, network effects, and recognition of its usefulness as a hedge against the decline in the value of fiat currency.”
#7 Failure as a payment system
The ECB paper asserts that Bitcoin has not fulfilled its original promise as a global payment system due to high fees and scalability issues. This rebuttal is countered by highlighting technological developments such as the accelerator network, which has greatly improved Bitcoin’s scalability, lowering fees and increasing transaction speeds.
“By focusing on early limitations, Bindsil and Schaaf fail to acknowledge the significant progress that has been made in improving scalability and efficiency,” they say. They also address the authors’ criticisms of Nakamoto’s analysis of financial transactions, saying: “Nakamoto’s argument is not about the voluntariness of mediation in certain types of transactions; Rather, it is about the costs and risks inherent in a system in which transactions depend on third-party credit institutions.
The authors also challenge the ECB paper’s formulation of CBDCs as superior to Bitcoin. It highlights the risks of centralization inherent in central bank digital currencies, including concerns about privacy, political manipulation and surveillance. They assert that “Bitcoin’s decentralized structure ensures resistance to censorship and financial sovereignty,” comparing it to the centralization of central bank digital currencies.
The appeal raises concerns about potential conflicts of interest due to the authors’ roles within the ECB. Both Bindseil and Schaaf are deeply involved in the development of the digital euro, a CBDC project that competes directly with decentralized cryptocurrencies like BTC. “Their vested interest in developing central bank digital currencies likely distorts their portrayal of Bitcoin as a speculative asset,” Porter and others said. conclude.
At press time, Bitcoin was trading at $66,465.
Featured image created with DALL.E, a chart from TradingView.com
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