KEY POINTS
- The ECB said Bitcoin's fair value remains at zero even with the SEC's recent move
- It added that looking forward to a boom-bust cycle in the cryptocurrency is a 'dire perspective'
- A growing demand for a 'currency of crime' may be one factor driving BTC's popularity, the bank said
The European Central Bank (ECB) maintains its stance that Bitcoin, the world's first decentralized cryptocurrency, remains irrelevant despite the recent approval of 11 spot Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC).
"For disciples, the formal approval confirms that Bitcoin (BTC) investments are safe and the preceding rally is proof of an unstoppable triumph. We disagree with both claims and reiterate that the fair value of Bitcoin is still zero," Ulrich Bindseil, the ECB's director general for Market Infrastructure and Payments, and Jürgen Schaaf, an adviser for the said ECB department, wrote in a Thursday blog post.
They said hoping for Bitcoin's "boom-bust cycle" is merely a "dire perspective" and it will have "massive" collateral damage.
For the ECB, Bitcoin transactions remain "inconvenient, slow, and costly," proving its failure to become a global decentralized digital currency. It also argued that outside the dark web, Bitcoin is "hardly" used for payments.
In terms of regulatory efforts to combat the widespread use of cryptocurrency by criminals, the results have been less stellar, as per the ECB.
Earlier this week, decentralized crypto exchange FixedFloat confirmed to International Business Times that it was exploited for at least $26 million worth in Bitcoin and Ether. The exchange's service remains down as of Thursday.
Also, last week, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) said Bitcoin was "specifically referenced" as a primary digital cryptocurrency used in online child sexual exploitation (OCSE) and human trafficking-related activities.
Furthermore, the ECB pointed out that BTC remains an unsuitable investment as it doesn't generate cash flow or dividends and cannot be used for commodities. It likewise offers no subjective appreciation.
On the use of spot Bitcoin ETFs, the ECB said such a "milestone" does not have an effect on the underlying assets' fair value, since an ETF with just one asset "turns its actual financial logic on its head." In essence, the SEC's approval is a new-gen rendition of "the naked emperor's new clothes," the bank said.
The infamous Hans Christian Andersen folktale tells the embarrassing story of a vain emperor who gets exposed because he believed con men who offered him clothes that they claimed could only be visible to the wise and competent.
The bank acknowledged that BTC is still rallying, albeit on "temporary" fueling factors. The cryptocurrency's resilience may be due to price manipulation in an unregulated market, a rising demand for what the ECB says is a "currency of crime" that allows for terrorism funding and other crimes such as ransomware and money laundering, as well as a lack of effective crypto regulations.
Meanwhile, Bitcoin experienced a rollercoaster ride in a turbulent crypto market Wednesday as the cryptocurrency dipped below $51,000 before bulls reacted to drive BTC back to $52,000. Despite the recovery, BTC's volatility was quite evident Wednesday, as per data from CoinGecko.
