In a recent report, Ulrich Bindseil and Jürgen Schaff, officials from the European Central Bank (ECB) have urged late-comers and non-owners of Bitcoin to push for legislation against the cryptocurrency in a bid to protect themselves from potential adverse impacts of wealth redistribution.
The report questions the ongoing shift in perception of Bitcoin, transitioning from its conceptual identity as a decentralized payment system to an increasingly viewed high-profile investment asset. This trend is endorsed by industry giants such as BlackRock’s Larry Fink and Mike Novogratz from Galaxy Digital, who echo the belief that limited supply coupled with growing demand of Bitcoin, akin to gold, will augment its value.
Contrarily, according to the ECB officials, limited supply alone does not assure an ongoing price surge as perceived widely among cryptocurrency enthusiasts. They emphasize that the term ‘rarity’ fits better than ‘scarcity’ in the Bitcoin context, as price fluctuation relies solely on demand, not on the fixed supply. The authors also caution that if the demand disappeared, Bitcoin’s value would plummet to zero.
Bindseil and Schaff predict potentially detrimental societal repercussions if Bitcoin’s value continues to surge without justification by underlying fundamentals. They argue Bitcoin does not enhance productivity in the economy, and any wealth accumulation by Bitcoin holders would lead to a fiscal imbalance within society.
The ECB officials strongly recommend non-owners of Bitcoin to oppose it and call for regulation to either prevent an increasing trend in the Bitcoin value or to get it wiped off entirely. They warn of deepening societal divisions and wealth inequality if political endorsement for Bitcoin-friendly policies is permitted. This underpins their idea that Bitcoin as an investment relies on wealth redistribution, disadvantaging late-comers and non-owners.