According to the European Central Bank, Bitcoin is artificially backed and should not be legalized by regulators or financial companies because it is more like gambling.
Bitcoin and other cryptocurrencies are variously touted as an alternative form of money and as a hedge against inflationary policies pursued by major central banks such as the European Central Bank (ECB) in recent years.
But with inflation resurfacing, a 75% decline over the past year and a series of scandals, including the collapse of the FTX stock market this month, have led to criticism of retaliation among central banks and munitions regulators.
Bitcoin’s value peaked at around $69,000 in November 2021, fell to around $17,000 in mid-June 2022, and remains where it remains today.
In a blog post that used unusually harsh language, the ECB said that bitcoin’s recent stabilization “one last artificial breath before the road to irrelevance“.
“Big bitcoin investors have the strongest incentives to keep the euphoria going“, wrote authors Ulrich Bindseil and Juergen Schaaf.” At the end of 2020, isolated companies began to introduce bitcoin at the expense of the company. Some venture capital firms also continue to invest heavily.“
They said venture capital investments in the cryptocurrency and blockchain industry totaled $17.9 billion as of mid-July, but did not provide evidence of price manipulation.
Regulators around the world are crafting rules for the world of cryptocurrency, a complex ecosystem that ranges from stablecoins supposedly backed by conventional currencies to forms of lending that happen on the blockchain or the distributed ledger that underpins those parts.
The ECB blog said the adjustment could be “is misunderstood as having been approved“.
“Since Bitcoin does not appear to be suitable as either a payment system or a form of investment, it should be treated in regulatory terms and therefore should not be legal.“, said Bindseil and Schaaf.
In an email, Bindseil said it would be better for regulators to treat cryptocurrencies like betting or gambling.
Attracting asset managers, payment service providers, insurers and banks to cryptocurrency,” the authors added in the blog. suggesting to small investors that it is healthy to invest in bitcoin “.
“The financial industry should be wary of the long-term damage of promoting bitcoin investments despite their short-term gains.“, blog authors said.
The CBA’s words carry weight because it is the main supervisor of eurozone banks and has a say in the European Union’s financial regulation.
On Monday, ECB President Christine Lagarde said that the European Crypto-Asset Market Regulation (MiCA), which is in the process of being approved, will be expanded in what she called a future version.MICA 2“.
This was likely a reference to bitcoin, which avoids the MCA because it has no legal entity in the EU, meaning only exchanges are affected by the rules.
Source: European Central Bank (ECB)
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