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ECB Paper Claims Bitcoin’s Price Rise Favours Early Holders, Poses Risk to Social Stability
- Bitcoin has failed as a payments system and is a threat to global economy and social stability, warns a European Central Bank (ECB) paper.
- The report argued that Bitcoin is a non-productive asset that has no intrinsic worth attracting only investors seeking a safe haven from fiat currencies.
- It warns that there is no real logic to it that offers a true logical basis for Bitcoin’s value.
- It posits that Bitcoin is now simply being used primarily as a store of value, allowing early adopters to accumulate a huge amount of wealth at the expense of non-holders and late-comers.
- The report argues that Bitcoin could lead to significant redistribution of wealth from late adopters to early adopters.
- As a consequence, the wealth effects on early adopters come at the expense of consumption of the rest of society, thereby resulting in social and economic instability, said the report.
- The paper, it says Bitcoin prices should be prevented from rising or ‘controlled’, urging policy-makers to control its price.
- Governments should implement policies aimed at killing Bitcoin or at least preventing it from continuing to increase in value, in an effort to prevent what it claims could be a large-scale and harmful redistribution of wealth.
- However, critics say the paper is misleading, as it fails to recognise that strong inflation of fiat currencies has limited their power over time.
- Bitcoin’s architect intended for the cryptocurrency to be used as a store of value, with hedge funds and Wall Street institutions investing enormously in BTC in 2020.
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