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FRANKFURT (Reuters) – Bitcoin enjoys artificial support and should not be legitimized by regulators or financial firms as it is primarily a speculative tool, the European Central Bank (ECB) said on Wednesday. ).
In a blog post written in an unusually stern tone, the ECB calls the recent stabilization of bitcoin’s price “a kind of artificially triggered last gasp before taking the path of insignificance”.
“The big investors in bitcoin are those who have the greatest interest in maintaining the euphoria”, add the authors of the text, Ulrich Bindseil and Jrgen Schaaf, referring to the role played since the end of 2020 by “isolated companies” and “certain companies venture capital”.
They point out that investments by venture capital funds in the cryptoasset and blockchain sectors represented $17.9 billion in mid-July.
They do not, however, provide evidence of price manipulation.
Bitcoin and other cryptocurrencies have been touted in recent years as an alternative form of money meant to protect investors against the adverse effects of the inflationary policies of major central banks, including the ECB.
But the 75% fall in bitcoin’s value over the past year, even as inflation accelerated, and a series of scandals involving players in the “crypto” sector, including the bankruptcy of the FTX platform in beginning of the month, restored the advantage to their detractors.
Bitcoin, which had reached nearly $69,000 in November 2021, was trading around $16,800 on Wednesday.
“NOT PAYMENT SYSTEM OR INVESTMENT INSTRUMENT”
Around the world, financial regulatory authorities are trying to provide a legal framework for the complex world of “crypto”, which includes activities ranging from the issuance of “stablecoins”, the value of which is supposed to be linked that of conventional currencies, to the loan of instruments funded on the “blockchain”.
The ECB blog believes that this regulation should not be equated with “approval”.
“Since bitcoin does not appear to be appropriate either as a payment system or as an investment instrument, it should not be treated as either of the two from a regulatory point of view and therefore should not be legitimate”, add the authors of the text.
In an email to Reuters, Bindseil clarified that cryptocurrencies should be regulated by regulatory authorities as a betting or gambling instrument.
The authors of the text published on the ECB’s website also regret that the interest shown in crypto by asset managers, payment service providers, insurers and banks “suggests to small investors that investing in bitcoin is healthy”.
“The financial industry should be aware of the long-term harms of promoting bitcoin investments despite the short-term profits they may derive from it,” they continue.
On Monday, during a hearing in the European Parliament, ECB President Christine Lagarde said that the draft European regulation on MiCA cryptoassets, currently under discussion, should probably be extended in the future.
His remarks were interpreted as a reference to bitcoin, which does not fall within the current scope of the MiCA regulation because it is not linked to any legal entity based in the European Union, which means that future rules will not could only apply to trading platforms.
(Report Francesco Canepa, French version Marc Angrand, told by Blandine Hnault)