ECB Economists Call For Action Against Bitcoin, Argue Its Rising Price Threatens Democracy

Economists at the European Central Bank (ECB) have raised alarms about the potential societal impact of Bitcoin's (BTC) rising price.

Economists at the European Central Bank (ECB) have raised the alarm over the potential societal impact of Bitcoin’s (BTC) surging price. They argue that the cryptocurrency has shifted from Satoshi Nakamoto’s vision of a global payment system to an investment asset, a trend that could leave later investors and those who do not hold Bitcoin facing significant economic challenges.

In a recent paper titled “Bitcoin: A Threat to Society?” ECB economists Ulrich Bindseil and Jürgen Schaaf highlight how thought leaders and celebrities have contributed to Bitcoin’s image as an investment with limitless growth potential.

Figures like BlackRock CEO Larry Fink have regarded Bitcoin primarily as a financial asset, disconnecting it from Nakamoto’s original narrative of a currency for transactions. However, instead of positioning BTC as a means of payment, these advocates liken it to gold — a finite resource viewed as a long-term investment.

This perspective raises questions about society’s motivation to choose Bitcoin as an investment vehicle. Despite its volatility, proponents expect Bitcoin’s value to trend upward over time, while offering little societal utility.

“In absolute terms, early adopters exactly increase their real wealth and consumption at the expense of the real wealth and consumption of those who do not hold Bitcoin or who invest in it only at a later stage,” they wrote.

Moreover, the paper warns that early adopters might liquidate their Bitcoin holdings to purchase luxury items, leaving latecomers at a disadvantage. This dynamic could lead to wealth redistribution from newer investors to those who entered the market first, exacerbating poverty among non-holders.

“The consequences of the Bitcoin-as-an-investment vision with perpetually increasing Bitcoin prices imply a corresponding impoverishment of the rest of society, endangering cohesion, stability and ultimately democracy,” the economists argued.

To counteract these risks, Bindseil and Schaaf advocated for strict price controls on BTC. They argued that this would prevent exploitation and potential civil unrest resulting from such inequitable wealth distribution.

They also urged current non-holders to recognize the need to oppose Bitcoin. Additionally, non-holders were advised to support legislation aimed at curbing its price increase or eliminating it 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. Failing to do so could skew election results in favour of politicians who advocate pro-Bitcoin policies, implying wealth redistribution and fuelling the division of society,” they concluded.

ECB’s Analysis Sparks Backlash

Meanwhile, the ECB’s paper has drawn criticism from industry experts. Market analyst Tuur Demeester took to Twitter to express his concerns, suggesting that the document may empower governments to impose stringent taxes and restrictions on cryptocurrency.

He noted that the central bank economists view Bitcoin as an existential threat that must be countered.

“Many of us have warned that this was coming: bitcoin as a major political fault line both in national and international elections. Well here it is. It means that us HODLers must take action to insure that governments respect our basic right to hold property,” Demeester warned.

Similarly, Marc van der Chijs, co-founder of the publicly traded BTC mining firm Hut 8, expressed concerns about the ECB’s stance. He argues that early adopters should not be vilified for their foresight and willingness to take risks.

“If Bitcoin should double or triple in 2025 I would not be surprised to see more politicians turning against BTC and trying to tax it excessively. bitcoiners should unite and vote for candidates that support sound monetary policy and oppose excessive taxation,” Van der Chijs claimed.

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