European Central Bank Experts See Bitcoin Appreciation as a Threat to Democracy, Advocate to Curb Its Rise

Experts from the European Central Bank analyzed the positive appreciation scenario of Bitcoin Bitcoin , but for them, this phenomenon is a possible catalyst for further division and segregation in society worldwide.

Experts from the European Central Bank analyzed the positive appreciation scenario of Bitcoin , but for them, this phenomenon is a possible catalyst for further division and segregation in society worldwide.

According to a paper published on October 12 by ECB experts, Bitcoin's price appreciation could be "fueling the division of society." Non-holders and latecomers must understand that "they have compelling reasons to oppose Bitcoin and advocate for legislation against it."

The paper, titled The Distributional Consequences of Bitcoin and co-authored by Ulrich Bindseil and Jürgen Schaaf, examines the significant appreciation of Bitcoin during its fifteen years of history. From zero to over $65,000. It's a lot, and the argument is that early adopters have been enriching themselves, even though Satoshi Nakamoto's invention did not fulfill its original "promise," focusing on its transition from an idealized payment system to a speculative investment asset.

The authors investigate the long-term economic and social consequences of a hypothetical scenario where Bitcoin's price rises continuously. They argue that such a scenario, despite appearing benign or promising to investors, poses significant risks to wealth distribution, economic stability, and social cohesion. "If the price of Bitcoin rises for good, the existence of Bitcoin impoverishes both non-holders and latecomers," the paper states.

Bindseil and Schaaf argue that Bitcoin's impact should not be viewed as merely a speculative bubble but as a mechanism that actively impoverishes non-holders and latecomers, undermining social cohesion and potentially threatening democracy. In this scenario, they advocate for policymakers and regulators to consider these distributional effects and to implement legislation that could curb Bitcoin's negative social impact. They also urge those who don't hold Bitcoin to understand that they need to step up and push for regulation that dismisses Bitcoin appreciation "or to see Bitcoin disappear altogether."

The Bitcoin Promise: A Global Payment System vs. an Investment Vehicle

I contacted Mr. Schaaf to understand the article better, explicitly questioning the "promise" that the paper paints as underdelivered. Was it something in the whitepaper? A comment in BitcoinTalk by Nakamoto? "When we speak of 'promise,' we have the implicit idea in mind to overcome the existing financial and payment system—not that anybody made this 'promise' explicitly," he explained to me through X direct messages.

However, the narrative about Bitcoin being exclusively a payment network has changed, and Satoshi Nakamoto never claimed that it was its sole goal.

Nowadays, Bitcoin is still seen as a viable payment network thanks to second-layer solutions like the Lightning Network, but new critical players like MicroStrategy's Michael Saylor or BlackRock's Larry Fink have been talking —and exploiting— the investment side of it. Despite this, there are countries like El Salvador, where Bitcoin is legal tender, and cities like Lugano, Switzerland, where it's a de facto currency. Bitcoin is a technology that allows global value exchange without third parties. As payments or investments, it's a network, a currency, and an investment vehicle. It's what its holders decide it is.

Bitcoin Advocates React

The ECB paper had an impact on Bitcoin advocates, especially on X. For Bitcoin analyst and Adamant Research founder Tuur Demeester, the paper is "the most aggressive" from a big institution.

"In all the years I've been monitoring the Bitcoin space, this is by far the most aggressive paper to come from authorities. The gloves are off. It's clear that these central bank economists now see Bitcoin as an early threat, to be attacked with any means possible," he posted in an X thread. Demeester was among the first to take the paper into the Bitcoin conversation on the platform.

Now that Bitcoin and cryptocurrencies are part of global conversations and even discussed among presidential candidates in the U.S., it’s critical to understand its goals and what it offers and be aware of the importance that it may have in the foreseeable future. The ECB article is signaling understandable concerns, but seeing Bitcoin early adopters as a threat to democracy or as an unfair new elite could be problematic in the long term. In the end, Bitcoin was almost a leap of faith for them.

What if Bitcoin failed? Then what would be the threat?

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