In response to the European Central Bank’s (ECB) recent anti-Bitcoin paper, a new academic paper titled “Challenging Bias in the ECB’s Bitcoin Analysis” has been released. This critique, authored by Murray A. Rudd alongside Allen Farrington, Freddie New, and Dennis Porter, scrutinizes the claims made by ECB officials Ulrich Bindseil and Jürgen Schaaf.
Dennis Porter, CEO and founder of Satoshi Action Fund, catalyzed the publication and announced its release on social media platform X, stating, “₿REAKING: Full Academic Rebuttal to the anti-Bitcoin ECB paper officially published.”
The original paper by Bindseil and Schaaf portrays Bitcoin as a speculative asset with limited intrinsic value and significant risks. It critiques Bitcoin’s volatility, lack of productive contribution, and wealth concentration, while promoting Central Bank Digital Currencies (CBDCs) as preferable solutions for modern financial systems.
Bitcoin’s Political Lobbying Influence
Bindseil and Schaaf argue that the cryptocurrency industry’s lobbying exerts undue influence, skewing regulatory policy in its favor. The rebuttal refutes this by underlining Bitcoin’s decentralized nature. Bitcoin, they explain, operates without a CEO, legal or marketing departments, or lobbyists. It is a neutral, global, leaderless protocol, with advocates typically lacking the institutional backing of dominant crypto corporations.
Furthermore, the authors highlight that traditional financial institutions spend significantly more on lobbying than the emerging crypto industry. In 2023, crypto-related lobbying expenditures in the US accounted for less than 1% of total financial sector lobbying expenditures.
Wealth Concentration
Addressing the claim that Bitcoin ownership is concentrated among a few large players, the rebuttal emphasizes the widespread dispersion of BTC holdings. Institutional and exchange wallets, they note, represent the holdings of diverse investors rather than individual entities. Many of the largest wallets belong to exchanges like Coinbase and Binance and ETF issuers such as BlackRock and Fidelity, who hold Bitcoin on behalf of millions of users.
The authors also challenge the view that wealth concentration is inherently unfair. They argue that any form of inequality is not automatically unjust and point out that Bitcoin has been accessible to all since its inception. Unlike most cryptocurrency tokens, Bitcoin had a fair and public launch without a pre-launch distribution or venture capital backers buying at a discount.
Lack Of Productive Contribution
The ECB paper asserts that Bitcoin’s price increase benefits holders but does not boost overall productivity or economic growth. The rebuttal counters this by emphasizing Bitcoin’s role in driving financial innovation and efficiency. As a technological protocol similar to TCP/IP, Bitcoin enables the development of new financial services.
In developing regions, particularly in the remittance market, Bitcoin’s impact is significant. For countries where remittances form a large part of GDP, reducing transaction costs can profoundly affect the poorest households, traditionally excluded from banking services.
Bitcoin Wealth Redistribution
Bindseil and Schaaf suggest that Bitcoin’s price appreciation leads to wealth redistribution, favoring early adopters over non-holders and latecomers. The rebuttal argues that this perspective ignores the voluntary nature of Bitcoin markets, where participants choose to enter based on their assessment of the asset’s potential.
Early investors, like those in stocks or venture capital, accept significant risks for potentially high returns, a common feature of markets for emerging technologies. The authors also discuss inflation’s broader implications, which redistribute wealth from savers to debt holders through inflationary policies. Bitcoin’s fixed supply and deflationary characteristics, they assert, offer a long-term store of value.
Lack Of Intrinsic Value
The ECB paper claims that Bitcoin lacks intrinsic value and cannot be priced using traditional asset valuation models. The rebuttal argues that this view overlooks scarcity, decentralization, and utility as a store of value in asset valuation.
Bitcoin, they state, operates similarly to gold, providing an alternative store of value, especially during monetary instability. The authors contend that the ECB’s argument is flawed because Bitcoin cannot be considered money solely due to its valuation challenges as a security.
Bitcoin Is A Speculative Bubble
Tackling the assertion that Bitcoin’s price movements indicate speculative bubbles, the rebuttal highlights that volatility is typical of emerging technologies. Bitcoin’s price appreciation, they explain, is driven by scarcity, adoption, network effects, and its utility as a hedge against fiat currency debasement.
Failure As A Payment System
The ECB paper argues that Bitcoin has not succeeded as a global payment system due to high fees and scalability issues. The rebuttal counters this by pointing to technological advancements like the Lightning Network, which have significantly improved Bitcoin’s scalability, reduced fees, and increased transaction speed.
By focusing on early limitations, Bindseil and Schaaf overlook significant progress in scalability and efficiency. They also critique Nakamoto’s analysis of financial transactions, emphasizing that Bitcoin’s decentralized architecture ensures censorship resistance and financial sovereignty, contrasting sharply with the centralized nature of CBDCs.
The rebuttal raises concerns about potential conflicts of interest due to Bindseil and Schaaf’s roles within the ECB, particularly their involvement in the digital euro project, a CBDC directly competing with decentralized digital currencies like Bitcoin. The authors suggest that their vested interest in promoting CBDCs skews their portrayal of Bitcoin as a speculative asset.
At press time, Bitcoin traded at $66,465.
