Economists at the European Central Bank (ECB) have expressed concerns regarding the potential societal effects of Bitcoin’s escalating price. They believe that the cryptocurrency has transitioned from Satoshi Nakamoto’s idea of a global payment system to an investment asset.
In a recent study, ECB economists Ulrich Bindseil and Jürgen Schaaf communicated their apprehensions about how Bitcoin’s rising value largely benefits early adopters. This pattern could create substantial economic difficulties for later investors and those without any Bitcoin holdings.
ECB Urges Action Against Bitcoin’s Perception as an Investment
The authors emphasize that influential figures and celebrities have played a role in enhancing Bitcoin’s status as an investment with unlimited growth opportunities. Prominent individuals like Larry Fink see Bitcoin primarily as a financial asset, thereby detaching it from Nakamoto’s initial concept of transaction currency.
Rather than promoting BTC as a payment method, these supporters compare it to gold—a limited resource regarded as a long-term investment. This viewpoint raises concerns regarding society’s incentives to adopt Bitcoin as an investment option. Despite its volatility, advocates anticipate that Bitcoin’s value will increase over time, while contributing minimal societal benefits.
“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 noted.
Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030
Additionally, the paper cautions that early adopters might sell off their Bitcoin holdings to acquire luxury goods, placing latecomers at a disadvantage. This scenario could result in a wealth shift from newer investors to earlier ones, further intensifying poverty for those who do not hold Bitcoin.
“The implications of viewing Bitcoin as an investment with continuously rising prices can lead to a corresponding impoverishment of the broader society, threatening social cohesion, stability, and ultimately democracy,” the economists asserted.
In light of these risks, Bindseil and Schaaf proposed implementing strict price regulations on BTC. They contend that such measures would prevent exploitation and mitigate possible civil unrest arising from unequal wealth distribution.
Furthermore, they encouraged current non-holders to recognize the necessity of opposing Bitcoin. They also advised non-holders to advocate for legislation aiming to limit its price rise or abolish it entirely.
“Latecomers and non-holders, along with their political representatives, should highlight that the notion of Bitcoin as an investment hinges on redistribution at their expense. Ignoring this could lead to skewed electoral outcomes favoring politicians who support pro-Bitcoin policies, reinforcing social division,” they concluded.
Meanwhile, the ECB’s paper has received significant backlash from industry experts. Market analyst Tuur Demeester cautions that the report could empower governments to implement rigorous taxes and restrictions on cryptocurrencies. He pointed out that central bank economists perceive Bitcoin as a fundamental threat that needs to be addressed.
“Many of us have warned that this was coming: Bitcoin as a significant political dividing line in both national and international elections. Well here we are. It signifies that we HODLers must take steps to ensure that governments respect our fundamental right to own property,” Demeester warned.
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Likewise, Marc van der Chijs, co-founder of the publicly traded BTC mining company Hut 8, voiced his concerns about the ECB’s position. He contended that early adopters should not face hostility for their foresight and risk-taking.
“If Bitcoin were to double or triple in value by 2025, I wouldn’t be surprised to see more politicians turning against BTC and attempting to impose excessive taxes on it,” Van der Chijs stated.
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