Recently, a paper published by the European Central Bank (ECB), implied that Bitcoin may operate similarly to a Ponzi scheme. This has sparked a strong backlash from the cryptocurrency community.
Crypto academics have released a detailed rebuttal criticizing the ECB’s portrayal of Bitcoin. They argue that the analysis was biased and flawed.
The controversial ECB paper, written by officials Ulrich Bindseil and Jürgen Schaaf, was published on 12 October 2024. It highlights Bitcoin’s volatility, wealth concentration, and lack of productive contribution as major shortcomings.
In response, Murray Rudd, from the Bitcoin advocacy group Satoshi Action Fund, accused the ECB of failing to understand Bitcoin’s true purpose and misrepresenting its technological foundations.
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Does ECB Fail To Understand Bitcoin’s True Purpose?
In the rebuttal, published on 22 October 2024, crypto academics argued that the ECB’s paper was undermined by “methodological weaknesses and personal or institutional biases.”
According to Rudd, the authors of the ECB report misunderstood Bitcoin’s evolution. Furthermore, they incorrectly claim that it had shifted from a payment system to a speculative investment.
He emphasized that Bitcoin’s core technologies—such as proof-of-work and decentralization—remain key to its value, contrary to the ECB’s suggestions.
₿REAKING: Full Academic Rebuttal to the anti-Bitcoin ECB paper officially published.
READ THE FULL REBUTTAL HERE: https://t.co/bgsralpn7k pic.twitter.com/yfKBCLQyMy
— Dennis Porter (@Dennis_Porter_) October 22, 2024
One of the major criticisms in the rebuttal was the ECB’s claim about Bitcoin’s wealth concentration. Rudd pointed out that large Bitcoin wallets often belong to exchanges holding funds for millions of users, not individual investors. The ECB report overlooks this.
Additionally, the paper’s focus on Bitcoin’s volatility failed to acknowledge that this is typical of early-stage technology adoption, Rudd argued.
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ECB Authors Raise Conflict Of Interest Concerns
The rebuttal also raised concerns about the ECB’s authors. Both the authors are involved in the development of a central bank digital currency (CBDC), or digital euro.
According to Rudd, this represents a significant conflict of interest. Rudd pointed out that the authors may have a vested interest in positioning Bitcoin as an inferior asset to promote CBDCs as a superior alternative for modern financial systems.
Moreover, the rebuttal highlighted several benefits of Bitcoin that the ECB paper ignored. This includes its role in financial inclusion, cross-border payments, and use in countries with unstable currencies.
Technological innovations, such as improvements in energy efficiency and contributions to power grid stability, were also overlooked, according to the academics.
The co-authors of the rebuttal include Allen Farrington, general partner at Axiom Capital, Freddie New from Bitcoin Policy UK, and Dennis Porter from the Satoshi Action Fund.
The ECB has long been a vocal Bitcoin critique. Earlier this year, the bank claimed that “Bitcoin has failed on the promise to be a global decentralised digital currency and is still hardly used for legitimate transfers.”
It even tried to underplay the approval of spot Bitcoin ETFs. “The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment,” the bank said.
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