Bitrabo Editorial
A fresh academic paper titled “Challenging Bias in the ECB’s Bitcoin Analysis” has emerged as a rebuttal to the recent anti-Bitcoin analysis by the European Central Bank (ECB). This paper, written by Murray A. Rudd and co-authors Allen Farrington, Freddie New, and Dennis Porter, critically examines a working paper released by ECB officials Ulrich Bindseil and Jürgen Schaaf.
Dennis Porter, the CEO and founder of Satoshi Action Fund, announced the release of this rebuttal on X, declaring, “₿REAKING: Full Academic Rebuttal to the anti-Bitcoin ECB paper officially published.”
The original ECB paper by Bindseil and Schaaf characterizes Bitcoin as a volatile, speculative asset with minimal intrinsic value and significant risks. It argues against Bitcoin’s influence on the financial market while promoting Central Bank Digital Currencies (CBDCs) as a better alternative for contemporary finance, according to Bitrabo’s report.
The new paper rebuts the main points made by Bindseil and Schaaf:
#1 Influence of Bitcoin’s Lobbying
Bindseil and Schaaf contend that Bitcoin lobbying greatly skews regulatory practices in favor of the cryptocurrency. In response, the authors point out that Bitcoin operates on a decentralized framework without centralized leadership or lobbying power. They assert that Bitcoin advocates often do not possess the institutional support that major companies in the crypto sector enjoy, stating, “Bitcoin does not have a CEO, legal or marketing departments, or lobbyists: it is a neutral, global, leaderless protocol.”
The authors also note that traditional financial institutions surpass the crypto industry regarding lobbying expenses, with crypto lobbying in the U.S. making up less than 1% of the financial sector’s total in 2023.
#2 Concentration of Wealth
The authors challenge the assertion that Bitcoin ownership is excessively concentrated among a few large investors, arguing it ignores the diverse ownership of Bitcoin across various holders. “Institutional and exchange wallets reflect the holdings of many investors rather than isolated entities,” they clarify. Many of the major wallets belong to exchanges like Coinbase and Binance or investment firms like BlackRock and Fidelity that manage Bitcoin for multiple customers.
They also dispute the idea that wealth concentration within Bitcoin is unjust, stating, “They imply that any inequality is inequitable, yet do not justify why—since the Bitcoin market has been open and accessible since day one.” They emphasize that Bitcoin launched without elite advantages, unlike many cryptocurrencies.
#3 Productive Contributions
While the ECB paper asserts Bitcoin does not contribute to overall productivity or economic growth, the rebuttal highlights Bitcoin’s role in fostering financial innovation. “Bitcoin serves as a technological framework, just like the TCP/IP protocol for the Internet, paving the way for new financial services,” they argue.
The authors stress Bitcoin’s positive impact in developing economies, particularly in remittances, stating, “By reducing transaction costs, Bitcoin can significantly benefit lower-income households dependent on remittances.”
#4 Redistribution of Wealth
In response to claims that Bitcoin’s price growth benefits early adopters at the cost of later entrants, the authors argue this overlooks the voluntary aspect of trading in Bitcoin markets. “Similar to early investors in stocks, Bitcoin’s first investors accepted high risks for potentially high returns,” they explain. The paper cites broader issues of inflation as redistributing wealth from savers, whereas Bitcoin’s fixed supply offers protection against this erosion.
#5 Questioning Intrinsic Value
With regards to claims surrounding Bitcoin’s lack of intrinsic value, the authors criticize this narrow view, asserting that factors like scarcity, decentralization, and its ability to serve as a store of value are crucial for asset valuation. “Bitcoin is comparable to gold, acting as an alternative store of value during economic instability,” they state.
They conclude that the ECB’s argument lacks coherence, highlighting that Bitcoin cannot be evaluated like traditional securities because it functions effectively as money.
#6 Speculative Nature
The rebuttal also maintains that Bitcoin’s price fluctuations should not be deemed speculative bubbles, but rather signify volatility typical in emerging technologies. “The value of Bitcoin is influenced by its scarcity, adoption, and function as a hedge against declining fiat currencies,” the authors argue.
#7 Limitations as a Payment Method
Lastly, the ECB’s critique that Bitcoin has failed as a payment platform due to high fees and scalability challenges is met with the argument that advancements like the Lightning Network significantly enhance Bitcoin’s performance, lowering costs and boosting transaction speeds.
The authors claim that focusing solely on initial barriers neglects the substantial improvements made to Bitcoin in terms of scalability. They also comment on Nakamoto’s analysis about financial transactions, clarifying that it deals with the costs associated with relying on third-party credit systems.
Furthermore, the authors question the ECB’s portrayal of CBDCs as superior to Bitcoin, underlining the potential risks associated with CBDCs, such as privacy invasion and political misuse. “Bitcoin’s decentralization provides resilience against censorship and upholds financial independence,” they argue, contrasting this with the centralized nature of CBDCs.
Additionally, they voice concerns over possible biases due to the authors’ affiliations with the ECB, suggesting that their positions in the digital euro project lead to a slanted view against Bitcoin. “Their motivations to promote CBDCs likely distort their assessment of Bitcoin as merely a speculative asset,” they conclude.
As of now, Bitcoin is priced at $66,465.