The European Central Bank has urged banks against pushing Bitcoin investments, noting that the seeming calm of the cryptocurrency would likely be short-lived, leading to a price decline.
In a Wednesday blog called “Bitcoin’s Last Stand” by Ulrich Bindseil and Jürgen Schaaf, the director general and adviser of the ECB of the institution stated that banks risked facing long-term reputational consequences for supporting Bitcoin despite the short-term gains they may generate. The bank cautioned that a further decline in BTC would disrupt client relations and undermine the industry’s image.
Despite peaking at $69,000 in November 2021, the world’s biggest cryptocurrency by market value has declined by as much as 75% YTD, according to statistics from CoinMarketCap. Earlier this month, the fall of FTX dropped Bitcoin’s price by over 20% in only two days. According to the ECB, although Bitcoin proponents may have taken the stability of Bitcoin post-FTX as a signal to get in, the worst is still likely to come.
The ECB also questioned Bitcoin’s capacity to overturn the current monetary and financial system, as Satoshi Nakamoto planned over a decade ago. Despite being advertised as a worldwide decentralised digital currency, Bitcoin’s conceptual design and technology flaws render it dubious as a payment method.
“Real Bitcoin transactions are tedious, sluggish and costly. Bitcoin has never been utilized to any considerable amount for legitimate real-world transactions.”
In addition, the bank contended that, unlike real estate, Bitcoin could neither create cash flow nor be used productively like commodities, and was thus inappropriate as an investment.
Amid ECB’s warning, European banks have been tiptoeing to crypto pools, despite the prolonged crypto winter while EU member states hesitantly iron out the MiCA rules.
Also Read: A market maker in Solana integrates Stripe for fiat-to-cryptocurrency transfers
