FRANKFURT, GERMANY – JUNE 13: A huge euro logo can be seen in front of the European Union headquarters. … [+]
Recent actions by central banks and governments have raised questions about whether there is a coordinated effort to rein in Bitcoin. In a recent working paper from the European Central Bank, Impact on Bitcoin circulation
Bitcoin
This paper by Ulrich Bindtheil and Jürgen Schaaf has been met with strong opposition.
Dr. Murray A. Rudd, Dr. Allen Farrington, Dr. Freddie New and Dr. Dennis Porter (respected figures in academic, economics and policy circles) argue that the ECB's analysis is flawed and biased. issued a rebuttal, disputing the economic depiction of Bitcoin. and social impact.
ECB’s claims against Bitcoin
The ECB paper argues that Bitcoin's rise has widened wealth inequality, benefiting early adopters at the expense of latecomers. He cited Bitcoin's volatility and dismissed it as a speculative asset with little productive economic contribution. The paper also positions central bank digital currencies as a desirable alternative to Bitcoin, suggesting they offer stability and financial inclusion.
This account portrays Bitcoin as a destabilizing factor that could shake up the economic status quo. However, critics argue that the ECB's analysis misrepresents Bitcoin's evolution and role in the financial system.
Rebuttal to the ECB
Rudd, Farrington, New and Porter detail some of the flaws in the ECB's assessment. Dr Murray Rudd, Scientific Adviser at the Satoshi Action Fund, stressed the importance of challenging the ECB's conclusions, saying: It may soon be peer-reviewed in an academic journal. By publishing our rebuttal, we aim to provide a balanced perspective that can inform editors, reviewers, and the broader public about important limitations of our analysis regarding Bitcoin and CBDCs. . ”
The paper focuses on Bitcoin's volatility, but overlooks that Bitcoin functions as a store of value, similar to gold. They argue that Bitcoin's price rise is a sign of growing recognition of Bitcoin's role as a hedge rather than a speculation.
Freddie New, head of policy at Bitcoin Policy UK, said: “It is disappointing that the authors of papers like this do not routinely review new research and developments in this area. The role of Bitcoin is becoming increasingly important for activists working in countries where other payment methods are not available or simply cannot provide cheap, fast and secure cross-border transfers, according to the latest research. Failure to do so really reduces the value of such papers.”
They also claim that the ECB has failed to properly differentiate Bitcoin from the broader cryptocurrency market. While the cryptocurrency industry may include speculative projects, Bitcoin stands alone as a decentralized protocol. The counterargument states that Bitcoin is fundamentally different from other digital assets because it is not driven by a central entity or corporation.
Global taxation and administration
The ECB’s stance on Bitcoin is not happening in a vacuum. The Minneapolis Federal Reserve recently introduced what could be seen as a tax on wealth to sustain government spending, while France is moving toward population-based taxation. G7 countries are discussing a global tax framework that could complicate Bitcoin ownership.
These efforts could signal a broader strategy by governments to maintain control over the monetary system by restricting access to decentralized assets like Bitcoin. This approach reflects what many in the cryptocurrency industry are calling “Chokepoint 2.0,” a coordinated effort to cut off Bitcoin’s access to financial systems and services.
Axiom's Allen Farrington said: “Comparing the fundamental properties of both Bitcoins as potential forms of money, Bitcoin clearly has an advantage over fiat currencies. It's no wonder that people on the receiving end are against it, but it's frustrating that Bitcoin is doing so instead.” They often resort to spreading misconceptions and contradictions about Bitcoin while publicly announcing their claims, but this rebuttal aims to correct those misrepresentations as thoroughly as possible. . ”
The smartphone displays the Bitcoin logo and the stock market percentages in the background. photograph … [+]
CBDC vs Bitcoin
One of the most important points raised is the ECB's favorable stance towards CBDCs. The ECB is presenting CBDC as a solution to the volatility created by Bitcoin. This response has raised concerns about the centralization of power and surveillance risks that CBDCs may pose. Being decentralized means Bitcoin offers a different kind of security that protects individuals from government overreach and censorship.
Dennis Porter, CEO of Satoshi Action Fund, said, “Bitcoin allows anyone to use Bitcoin, regardless of race, color, gender, religion, political beliefs, creditworthiness, residence, or immigration status.'' “CBDCs can never be as inclusive as Bitcoin because you can participate in the network.” We simply do not tolerate discrimination. ”
The promotion of CBDC can be seen as another aspect of Chokepoint 2.0. Centralized financial institutions promote the use of digital currencies they control, while seeking to rein in Bitcoin through regulation, taxation, and banning. By positioning CBDCs as a “safe” alternative, central banks aim to maintain control over the financial system and steer users toward a model with less freedom than Bitcoin's decentralized network.
The counter-argument points out that the ECB's arguments ignore Bitcoin's potential for financial inclusion and innovation, particularly in areas where traditional banking is failing. Bitcoin's decentralized structure provides opportunities for cross-border payments and serves as an alternative for those in inflationary economies.
flawed argument
This rebuttal also refers to the ECB's argument that Bitcoin is a tool for wealth concentration. This argument fails to account for the increased participation of retail investors and the circulation of Bitcoin among exchanges. Many of the largest wallets belong to exchanges that hold assets on behalf of millions of users, rather than a few wealthy individuals. Bitcoin's reach is expanding as more people challenge the idea that it is a tool for a few and recognize its value.
The argument that the rise in the price of Bitcoin does not contribute to productivity has also been criticized. This specifically refers to Bitcoin's role in driving technological innovation through advances in blockchain, cryptography, and energy efficiency in mining technology. These contributions are ignored by the ECB, which focuses only on price fluctuations without considering the wider economic impact of Bitcoin's growth.
The impact of central bank actions
This rebuttal suggests a combination of policies and narratives coming from central banks and governments, suggesting a concerted effort to undermine Bitcoin's influence. This is a way to protect Bitcoin's value as a decentralized global asset. It takes issue with the ECB's framing of Bitcoin as a destabilizing factor and questions its promotion of CBDCs as a more stable alternative.
Bitcoin's independence from state control appears to be at the center of the debate. This independence is not a flaw, but a feature that has the potential to provide financial sovereignty in a world increasingly dominated by centralized control.
