The new report claims Bitcoin's rise redistributes wealth from latecomers to early adopters.
Key Takeaways
- ECB officials argue Bitcoin's rise redistributes wealth from latecomers to early adopters.
- The report urges non-holders to advocate for legislation against Bitcoin to protect their wealth.
Those who have been late to Bitcoin or don’t own the coin have good reasons to oppose it and advocate legislation to protect themselves from its negative consequences of wealth redistribution, according to a recent analysis authored by ECB officials Ulrich Bindseil and Jürgen Schaff.
The authors, who said Bitcoin’s February price rally was driven by price manipulation in an earlier report, claim Bitcoin has shifted from its original vision as a decentralized payment system to primarily an investment asset.
The argument is backed by the growing support for Bitcoin from high-profile figures like BlackRock CEO Larry Fink or Galaxy Digital’s founder Mike Novogratz, who view Bitcoin as a pure investment asset. Their perspective is that Bitcoin’s limited supply and growing demand will drive its price up, similar to gold.
However, ECB officials assert that Bitcoin’s limited supply doesn’t guarantee sustained price increases, contrary to popular belief among crypto supporters.
“There are countless assets on earth with a limited or finite supply, and for none of them the notion that they can sustain an ever-increasing valuation over the long term, regardless of the services or benefits they provide to society, is particularly plausible,” the report states.
“Proponents of the Bitcoin investment perspective ignore the fact that “scarcity” describes the relationship between supply and demand. A limited, finite supply does not equate to scarcity. In the context of Bitcoin with its limited and fixed supply the non-economic term “rarity” seems more appropriate. If supply is fixed, the price becomes exclusively dependent on demand. And if the demand were to disappear, the price would be zero,” it says.
The authors warn that even in a scenario where Bitcoin’s value continues to rise, it could lead to negative economic consequences if not justified by the underlying fundamentals. They argue that Bitcoin doesn’t enhance the economy’s productive capacity, and any wealth generated by Bitcoin holders comes at the expense of others in society.
“This redistribution of wealth and purchasing power is unlikely to occur without detrimental consequences for society,” the report claims.
“Early adopters have a vested interest in promoting Bitcoin values to redistribute wealth and consumption from latecomers to themselves, maybe without being conscious of the redistributive nature of their vision,” it states.
“In any case current non-holders should realize that they have compelling reasons to oppose Bitcoin and advocate for legislation against it, aiming to prevent Bitcoin prices from rising or to see Bitcoin disappear altogether. Latecomers and non-holders and their political representatives should emphasize that the idea of Bitcoin as an investment relies on redistribution at their expense,” it adds.
The authors also warn that failing to do so could lead to electoral outcomes favoring politicians who support pro-Bitcoin policies, which could exacerbate wealth inequality and societal divisions by promoting a system that benefits early adopters while disadvantaging latecomers and non-holders.
Is the ECB declaring war on Bitcoin?
It’s not the first time ECB officials have shown their skepticism towards Bitcoin. As Crypto Briefing reported, ECB officials previously likened the approval of US Bitcoin ETFs to the ‘Naked Emperor’s New Clothes.’
The ECB faced social backlash as soon as the paper surfaced. Wall Street veteran Max Keiser criticized the paper for making false claims about Bitcoin’s original purpose.
The @ecb makes a rookie mistake by claiming Bitcoin originated as a payment means. This is false. The word ‘Cash’ in the White Paper refers to money, as in Gold, not fiat currency. Bitcoin has always been digital Gold.
Satoshi makes this clear in subsequent posts & messages. pic.twitter.com/qEMhoNDWpE
— Max Keiser (@maxkeiser) October 19, 2024
Blockstream advisor Tuur Demeester, who first brought the paper to public attention, believes the ECB’s paper is “a true declaration of war” and that authorities will use it to justify harsh taxes or bans on Bitcoin.
Demeester warns that the paper could have serious consequences for Bitcoin and its supporters, urging holders to take action to protect the rights of individuals to hold Bitcoin.
1/ This new paper is a true declaration of war: the ECB claims that early #bitcoin adopters steal economic value from latecomers. I strongly believe authorities will use this luddite argument to enact harsh taxes or bans. Check 🧵 for why: pic.twitter.com/qg31YenTSC
— Tuur Demeester (@TuurDemeester) October 19, 2024
Following critical remarks by the ECB in February, Bitcoin established a new record high in mid-March. After the rally, Bitcoin experienced price corrections but it remains solid above $45,000.
Bitcoin is currently trading at around $68,100, up over 60% year-to-date, per TradingView.
