ECB’s Jürgen Schaaf Calls Bitcoin a “Speculative Bubble” to Eliminate

In a post on X dated Oct. 20, Jürgen Schaaf, an adviser to the Senior Management of the Market Infrastructure and Payments sector at the ECB, referred to Bitcoin as “a speculative bubble that will ultimately burst.”

He asserted that this situation would lead to “significant social harm due to its substantial energy consumption and its role in facilitating illegal transactions.”

This anti-Bitcoin rhetoric follows a study from the European Central Bank, co-authored by Schaaf last week, which argued that long-term holders of BTC were diminishing the wealth of newer investors.

Central Bank’s Critique of Bitcoin

Schaaf contended that even if Bitcoin’s value continues to rise and the bubble does not pop, “the financial gains accrued by early adopters come at the cost of those who enter later or do not hold any.”

This results in “significant redistribution effects,” he mentioned before making an even bolder statement:

“The wealth and consumption of early holders increase while others grow poorer, regardless of their ownership status in Bitcoin.”

He also expressed concern that this wealth redistribution could “fray societal cohesion,” as those who come late will be disillusioned as their purchasing power diminishes.

The central bank advisor proposed a straightforward solution: abolish Bitcoin.

“Individuals who do not own Bitcoin should realize that the cryptocurrency’s rise is driven by the redistribution of wealth at their detriment. There are strong reasons to support policies that restrict Bitcoin’s expansion or even eradicate it.”

11/ In democracies, Bitcoin could sway elections. Candidates favoring crypto may gain traction from early adopters, potentially influencing outcomes in favor of policies detrimental to non-holders.

— Jürgen Schaaf (@schaaf_jurgen) October 20, 2024

Steven Smith, CEO of Celestial Mining Management, offered a solid counterpoint by stating that it is the marginal sellers and buyers that determine the value of BTC.

“The essence is that we don’t have bureaucrats pontificating or intervening at the expense of others based on their views of what is ‘fair’ or ‘ideal’ or whatever.”

He further stated that such fundamental properties render BTC so valuable that a significant portion of the population will opt to safeguard their wealth in it “rather than in traditional instruments over which entities like you [central banks] exert control through the debt-money framework.”

Why Central Banks Dislike Bitcoin

Central Banks focus on managing debts and monetary values, meaning that decentralized assets, which are controlled by individuals, pose a substantial threat to their authority.

Moreover, the ECB is promoting a digital euro CBDC (central bank digital currency) that will be tightly regulated and intended solely for transactional purposes, not for investment or storage.

Similarly, the United States Federal Reserve Bank of Minneapolis proposed in a recent paper that Bitcoin should face taxation or a ban because it hinders government efforts to effectively manage debts amidst “permanent deficits,” it noted.

In reality, it is the central bank and government’s money-printing practices and questionable fiscal strategies that impoverish people through inflationary trends and the gradual erosion of fiat currencies, not Bitcoin.