© Reuters
By Geoffrey Smith
Investing.com — The European Central Bank isn’t one to pass up the opportunity to strike cryptocurrencies ashore.
Officials at Frankfurt’s central bank, which has been consistently hostile to private digital currencies for years, said Wednesday that the and other digital assets face their “last stand” as their inability to develop a use cases and their negative environmental impacts are becoming increasingly evident.
In a blog post, senior officials Ulrich Bindseil and Jürgen Schaaf said that even before the dramatic implosion of cryptocurrency exchange FTX – which sent lending platform BlockFi into bankruptcy and crippled rival Genesis – bitcoin was “on the road to uselessness”, unable to support the influx of new money on which all speculative instruments depend.
This failure, they argue, only highlighted its lack of a core use case, being neither a store of value (due to its volatility and inability to generate returns) nor a means of exchange, such as fiat currency.
“The valuation of bitcoin in the market is therefore based purely on speculation,” they argued, adding that “speculative bubbles are based on the influx of new money.”
Fresh money has indeed been scarce since the collapse of the Terra/Luna network earlier this year, which set off a chain of events that led to the much larger bankruptcy of FTX last month. Both of these cases highlighted widespread failures in risk management and other core principles of corporate governance.
Bindseil and Schaaf noted that the venture capital sector, a big loser in the FTX debacle, still has a strong incentive to support sentiment towards crypto, having invested just under $18 billion in the space. Much of that money is diverted to lobby US regulators, they suggested.
“In the United States alone, the number of crypto lobbyists has nearly tripled, from 115 in 2018 to 320 in 2021. Their names sometimes read like a who’s who of US regulators,” ECB officials said. .
This lobbying has contributed to slower progress in crypto regulation in the United States than elsewhere, they added, despite the fact that the Financial Stability Board, which coordinates the activities of G20 financial regulators, called in July that crypto assets and markets are subject to effective regulation and supervision.
Bankman-Fried, in particular, has drawn criticism for his huge donations to the Democratic Party, having donated $40 million to party candidates ahead of the 2022 midterm elections. However, he said on Wednesday he had donated a similar amount to Republican candidates on an “obscure” basis, hoping to avoid the wrath of liberal-minded reporters.