In response to the latest anti-Bitcoin paper from the European Central Bank (ECB), a new academic paper titled “Challenging Bias in the ECB’s Bitcoin Analysis” has been published. The paper, written by Murray A. Rudd and co-authors Allen Farrington, Freddie New and Dennis Porter, builds on a recent study by ECB officials Ulrich Bindtheil and Jürgen Schaaf. It comprehensively criticizes the book.
Dennis Porter, CEO and founder of the Satoshi Action Fund, who originated the paper, announced its publication in “This is an academic rebuttal.”
The original ECB paper by Bindseil and Schaaf depicts BTC as a speculative asset with limited intrinsic value and significant risks. As reported by Bitcoinist, the group criticized BTC's volatility, lack of productive contribution, and concentration of wealth, while advocating central bank digital currencies (CBDCs) as a superior solution for the modern financial system.
This rebuttal systematically addresses and refutes Bindtheil and Scharf's main arguments.
#1 Bitcoin’s Impact on Political Lobbying
Bindseil and Schaaf argue that industry lobbies wield disproportionate influence and skew regulatory policy in favor of industry. Counter-arguments counter this by emphasizing Bitcoin's decentralized nature. “There are no CEOs, legal departments, marketing departments, or lobbyists; it is a neutral, global, leaderless protocol. ,” the authors write.
They point out that traditional financial institutions spend much more on lobbying than emerging industries, and that by 2023, crypto-related lobbying spending in the U.S. will be the same as financial sector lobbying spending. It was pointed out that they accounted for less than 1% of the total.
#2 Concentration of wealth
Counter-arguments to claims that ownership is highly concentrated in a few large companies emphasize that this view overlooks the wide dispersion of BTC holdings. “Institutional investor and exchange wallets represent the holdings of diverse investors rather than a single entity,” the authors explain. Not only do many of the largest wallets belong to exchanges like Coinbase and Binance, but also ETF issuers like BlackRock and Fidelity, which hold BTC on behalf of millions of users. It points out that it belongs.
The authors also challenge the idea that the concentration of wealth in coins is inherently unfair. “They imply that all forms of inequality are unjust, but fail to explain why this is the case. Bitcoin's free market has been available to everyone since its creation.” they wrote. “Unlike the majority of cryptocurrency tokens (“altcoins”), Bitcoin has been made fair and publicly available. There was no pre-launch distribution of Bitcoin, no “founder stock,” and no venture capital backers to buy Bitcoin at a discount. ”
#3 Lack of productive contribution
The ECB document argues that an increase in BTC prices will create a positive consumption effect for holders, but will not increase overall productivity or economic growth. The rebuttal challenges this by highlighting BTC's important role in driving financial innovation and efficiency. “Bitcoin serves as a technical protocol similar to the TCP/IP protocol that underpins the Internet, enabling the development of new financial services,” they argue.
The authors also highlight the impact on developing regions, particularly remittance markets. “For countries that derive a large proportion of their GDP from remittances, lower transaction costs could have a dramatic impact on the poorest households, who have traditionally been excluded from banking services,” the paper said. are.
#4 Bitcoin Wealth Redistribution
Bindseil and Schaaf suggest that rising Bitcoin prices will lead to a redistribution of wealth, benefiting early adopters at the expense of non-holders and latecomers. Counter-arguments argue that this argument ignores the voluntary nature of the BTC market, with participants freely choosing to enter based on their own assessments of an asset's potential.
“Similar to early investors in equity and venture capital, Bitcoin’s early adopters assumed significant risk in exchange for potentially higher returns, an inherent characteristic of emerging technology markets,” they wrote. explain. They also highlight the broader effects of inflation, which redistributes wealth from savers to debtors through inflationary policies. “Bitcoin’s fixed supply and deflationary properties counteract this decline and provide long-term store of value,” they argue.
#5 Lack of intrinsic value
The ECB document argues that Bitcoin has no intrinsic value and cannot be priced using traditional asset valuation models. Counter-arguments argue that this narrow definition ignores the role that scarcity, diversification, and utility as a store of value play in asset valuation.
“Bitcoin functions similarly to gold, providing an alternative store of value, especially during times of financial instability,” they said. They continued, “Their argument is fundamentally flawed. They claim that BTC cannot be valued as a security and therefore cannot be considered a currency, but in reality, it cannot be considered a currency precisely because it is a currency. “BTC cannot be valued as a security.”
#6 Bitcoin is a speculative bubble
A counter-argument to claims that BTC price fluctuations are indicative of a speculative bubble points out that volatility is a characteristic of emerging technologies. “Bitcoin’s price rise is being driven by its scarcity, adoption, network effects, and perceived usefulness as a hedge against fiat currency depreciation,” they explain.
#7 Failure as a payment system
The ECB document argues that Bitcoin is not fulfilling its promise as a global payments system due to high fees and scalability issues. This counterargument counters this by highlighting technological advances like the Lightning Network, which have dramatically increased Bitcoin's scalability, reduced fees, and increased transaction speeds.
“By focusing on early limitations, Bindtheil and Scharf fail to recognize that significant progress has been made in improving scalability and efficiency,” they argue. They also mention the author's criticism of Nakamoto's analysis of financial transactions, stating: Rather, it is about the costs and risks inherent in a system where transactions rely on third-party credit institutions. ”
The authors also dispute that the ECB document frames CBDCs as superior to BTC. These highlight the centralization risks inherent in CBDCs, including concerns about privacy, political manipulation, and surveillance. “Bitcoin’s decentralized architecture ensures censorship resistance and financial sovereignty,” they argue, contrasting it with the centralization of CBDCs.
This rebuttal raises concerns about potential conflicts of interest arising from the authors' roles within the ECB. Bindseil and Schaaf are both heavily involved in the development of the Digital Euro, a CBDC project that directly competes with decentralized digital currencies like BTC. “Their vested interest in promoting CBDCs is likely distorting the portrayal of Bitcoin as a speculative asset,” Porter et al. To conclude.
At the time of writing, BTC was trading at $66,465.
Featured image created with DALL.E, chart on TradingView.com
