The President of the European Central Bank (ECB), Christine Lagarde, reacted when she arrived at the press … (+)
Experts from the European Central Bank analyze the scenario of a positive increase in the value of Bitcoin
Bitcoin
The paper, titled The Distributional Consequences of Bitcoin and authored by Ulrich Bindseil and Jürgen Schaaf, explores the remarkable appreciation of Bitcoin over its fifteen-year history. From zero to over $65,000. That’s a lot, and the argument is that early adopters have enriched themselves even though Satoshi Nakamoto’s invention didn’t live up to its original “promise,” focusing on its transition from an idealized payment system to a speculative investment asset.
The authors examine the long-term economic and social consequences of a hypothetical scenario in which the price of Bitcoin continues to rise. They argue that while such a scenario may seem benign or promising to investors, it poses significant risks to wealth distribution, economic stability and social cohesion. “If the price of Bitcoin goes up for good, Bitcoin’s existence will impoverish both non-holders and latecomers,” the paper states.
Bindseil and Schaaf argue that Bitcoin’s impact should not be seen as a mere speculative bubble, but as a mechanism that actively impoverishes non-holders and latecomers, undermines social cohesion and potentially threatens democracy. In this scenario, they advocate for policymakers and regulators to consider these distributional impacts and implement legislation that could curb Bitcoin’s negative social impacts. They also urge those who don’t own Bitcoin to realize that they need to step up and demand regulation that devalues Bitcoin “or see Bitcoin disappear entirely.”
The Bitcoin Promise: Global Payment System vs. Investment Vehicle
I reached out to Mr. Schaaf to better understand the article, specifically questioning the “pledge” to paint the paper as under-delivering. Was it something on a white paper? Nakamoto’s comment on BitcoinTalk? “When we talk about a ‘promise’, we have in mind the implicit idea of defeating the existing financial and payment system – not that anyone has made this ‘promise’ explicitly,” he explained to me via X direct message.
However, the narrative of Bitcoin solely as a payment network has changed, and Satoshi Nakamoto never claimed that was its sole purpose.
Today, Bitcoin is still considered a viable payment network thanks to second-layer solutions such as the Lightning Network, but new critical players such as MicroStrategy’s Michael Saylor or BlackRock’s Larry Fink have talked about—and exploited—its investment side. Despite this, there are countries like El Salvador where Bitcoin is legal tender and cities like Lugano, Switzerland where it is the de facto currency. Bitcoin is a technology that enables the global exchange of value without third parties. As a payment or investment, it is a network, currency and investment tool. Its owners decide it is.
Bitcoin Advocates reacts
The ECB paper had an impact on Bitcoin supporters, especially X. For Bitcoin analyst and founder of Adamant Research Tuur Demeester, the paper is the most “aggressive” of the major institution.
“In all the years I’ve been following the Bitcoin space, this is by far the most aggressive paper from the authorities. The gloves are off. It’s clear that these central bank economists now see Bitcoin as an existential threat to be attacked by any means possible,” he wrote on X- in the chain. Demeester was among the first to bring the paper to the platform for Bitcoin discussion.
Now that bitcoins and cryptocurrencies are part of global conversations and are even being discussed among US presidential candidates; It is important to understand its goals and the opportunities it offers, and to be aware of its importance in the near future. The ECB article expresses understandable concerns, but seeing bitcoin’s early adopters as a threat to democracy or an unfair new elite could be problematic in the long run. In the end, Bitcoin was almost a leap of faith for them.
What if Bitcoin fails? So what would be the threat?