The European Central Bank (ECB) stated on Wednesday that bitcoin is being artificially pushed up and should not be legitimized by authorities or financial firms as it approaches “irrelevance.”
The ECB said in a blog post that bitcoin’s recent stabilization was “an artificially induced last gasp before the road to irrelevance.”
“Big bitcoin investors have the strongest incentives to keep the euphoria going,” authors Ulrich Bindseil and Juergen Schaff wrote. “At the end of 2020, isolated companies began to promote bitcoin at corporate expense. Some venture capital firms are also still investing heavily.”
The bank also said in its blog that regulation could be “misunderstood for approval.”
“Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimized,” the authors said.
Bitcoin and other cryptocurrencies have been promoted in various ways as an alternative form of money and a hedge against the recent inflationary policies followed by major central banks such as the ECB. However, a 75% drop in the last year, just as inflation began to rise, and a series of scandals, including the collapse of the FTX exchange last month, have given opponents among central bankers and regulators ammo to fight back.
Year-to-date, the digital asset fell more than 60% in what critics are calling the crypto winter.
“The financial industry should be wary of the long-term damage of promoting bitcoin investments – despite short-term profits they could make,” the authors added.
ECB President Christine Lagarde stated on Monday that the EU’s Market in Crypto-assets Regulation (MiCA), which is now being authorized, will most likely need to be expanded in a future iteration dubbed “MiCA 2.”
Information for this briefing was found via Financial Post and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.