Is ECB’s Controversial Bitcoin Report a Warning or a Push for a Digital Euro?

At the end of October 2024, the European Central Bank (ECB) released a working paper titled The Distributional Consequences of Bitcoin (BTC), which has been met with quite a lot of criticism from crypto communities in the region, seeing how the paper itself is criticizing Bitcoin (BTC) in only benefiting early adopters.

The paper’s authors further believe that BTC failed to do what it was originally programmed to – “to provide the world with a better global means of payment.” The thesis runs that, compared to gold, BTC is merely an investment asset that primarily benefitted those who chipped in at its early stage, with latecomers having little opportunity to benefit from the cryptocurrency at such a late investment stage.

However, the working paper’s loud “anti-BTC” statements could also be seen as a ruse to further push for the development of a digital euro, which the ECB has been eyeing for quite some time now.

After all, Bitcoin’s decentralized nature goes against everything the ECB is trying to achieve with the introduction of a digital euro.

Table of Contents Table of Contents

1. Key Takeaways
2. Is ECB Using a "Scare Tactic"?
3. The ECB and Digital Euro: What Are Central Authorities Missing?
4. EU Adopts Conscious Crypto Approach
5. US Elections Could Dictate Global Crypto Regulation
6. The Bottom Line
7. FAQs
8. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Is ECB Using a "Scare Tactic"?
3. The ECB and Digital Euro: What Are Central Authorities Missing?
Show Full Guide
4. EU Adopts Conscious Crypto Approach
5. US Elections Could Dictate Global Crypto Regulation
6. The Bottom Line
7. FAQs
8. References

Is ECB Using a “Scare Tactic”?

As crypto continues to be a loud talking point for government authorities worldwide, some experts believe that the ECB’s working paper on BTC could be considered a “scare tactic”.

Nikolaos Kostopoulos, an advisor specializing in blockchain and Central Bank Digital Currency (CBDC) projects, added that the ECB’s current paper is “likely the most controversial” to this day.

“The paper goes so far as to argue that Bitcoin’s wealth redistribution effect could undermine societal cohesion and democracy.

“In capitalism, several non-productive assets are similar to Bitcoin in the sense that they do not directly contribute to the productive capacity of the economy but still hold value…

“From my perspective, the paper opens the door to heated debates on capitalism, rather than Bitcoin itself, and is a risky statement.”

Tuur Demeester, a long-time BTC analyst, has also claimed the report to be “by far the most aggressive paper to come from authorities” in a Twitter thread, highlighting that central bank economists could be seeing Bitcoin as “an existential threat” the longer the asset spends on the market.

5/ In all the years I've been monitoring the bitcoin space, this is by far the most aggressive paper to come from authorities. The gloves are off. It's clear that these central bank economists now see bitcoin as an existential threat, to be attacked with any means possible.

— Tuur Demeester (@TuurDemeester) October 19, 2024

Other EU crypto experts noted the paper to have an “incomplete” perspective, leading to conclusions that could be partially flawed.

Alberto Fernandez the ecosystem representative at Qubic explained:

“Bitcoin is distinct from traditional assets because it operates independently of centralized jurisdiction or governance.

“Its value is not dictated by any central authority but rather by the users themselves, who determine its worth based on adoption, trust, and utility.

“Speaking frankly, I believe that we can assert that people acquire Bitcoin at the price they deserve, reflecting the level of understanding they bring to their investment.”

The ECB and Digital Euro: What Are Central Authorities Missing?

Despite having had such a negative outlook on Bitcoin, the ECB continues to push for the creation of a digital euro, an asset that will primarily resemble cryptocurrencies only in nature but will continue to remain under the ECB’s full control.

This raises another prominent question: can a centrally-controlled digital euro truly compete with decentralized cryptocurrencies like Bitcoin, especially given the differing perspectives on crypto within the EU itself?

A recent Politico report highlighted how certain European states such as Germany, France, the Netherlands, and six other nations are concerned about the ECB having the right to specify holding limits for the digital euro.

It seems to be an ongoing battle where centralized authorities continue to pursue financial oversight and control — precisely the kind of power that decentralized solutions inherently reject. This desire for control appears to shape the ECB’s perspective on digital assets, as reflected in its recent working paper on Bitcoin.

In critiquing Bitcoin, the ECB seems to have overlooked one of its core benefits (along with that of stablecoins and other cryptocurrencies): as a vehicle for low-cost, borderless transactions that foster financial inclusion in regions with limited banking access.

“As a secure, transparent, and programmable form of money, it supports remittances and cross-border trade, reducing reliance on intermediaries. Gary Gensler recently reaffirmed the SEC’s position that Bitcoin is not a security, stating how participants now have a way to buy into that through ETFs [exchange traded funds],” Shant Kevonian, the CEO and Founder of EtherMail explained.

Alice Shikova, the marketing lead at digital identity platform SPACE ID, added that the creation of a digital euro by a centralized authority could also create worries around privacy and censorship as concerns could surge over the government having more oversight over people’s financial transactions and therefore total control over their financial lives.

“If one centralized entity has access to all our financial data, that makes us as individuals very vulnerable.”

EU Adopts Conscious Crypto Approach

Despite what might at first glance seem to be a pretty hefty anti-crypto stance from the EU, experts tell Techopedia it thought to be a conscious approach.

Maria Carola, the CEO of StealthEx, a crypto exchange, told Techopedia:

“The EU population is generally older if compared with other regions, and the percentage of people holding cryptocurrency remains quite low.

“As people age, they tend to be more conservative and often show less interest in modern financial instruments like cryptocurrencies.

“EU governments have, therefore, adopted a stance that focuses on providing maximum protection for the financial interests of their citizens.”

Carola added that as a result, the EU’s stance on crypto might appear as restrictive, reflecting a cautious approach that will likely evolve as Europe observes how leading global economies handle crypto regulation and adoption.

Kostopoulos added that the completion of the Markets in Crypto Assets regulation (MiCA) has given clarity to the industry, which is helping crypto companies in the region operate with ease and safety.

EtherMail’s Kevonian added that MiCA has been couched as a framework that balances innovation with consumer protection and financial stability, giving expression to the EU’s increasingly measured stance around crypto.

US Elections Could Dictate Global Crypto Regulation

The current U.S. Presidential Election has been framed as being one of the most crypto-heavy ones, with talks of crypto regulations and endorsements for the digital assets industry coming in from both political parties and candidates so it is no surprise that the results of the elections will dictate global crypto regulations.

“While MiCA is set to come into effect on December 30, 2024, potential shifts in U.S. policies around crypto regulation, taxation, and stablecoins could certainly influence positions in Europe moving forward,” EtherMail’s Kevonian said.

Other experts are not as positive that the results of the U.S. Presidential race could have a big impact on global crypto regulations, however, that also does not mean that they might go completely unnoticed.

StealthEx’s Carola noted:

“Key decisions following the election will be closely monitored by governments globally, including in the EU. However, a potential pro-crypto stance by the U.S. may not necessarily impact Europe’s cryptocurrency policies, as there is limited direct influence here.

“This would be particularly true if international transactions could be handled through CBDCs, reducing the need for large-scale infrastructure adjustments that would appeal to a broader audience.”

The Bottom Line

The ECB’s latest report on Bitcoin stirs debate, casting Bitcoin as beneficial primarily to early adopters while overlooking its decentralized strengths.

The timing raises questions on whether it’s part of a broader push for the digital euro — a centrally-controlled alternative facing its skepticism within the EU.

Ultimately, the debate underscores the ongoing tension between central authority and the decentralized promise of crypto, with both sides vying for future financial influence.

FAQs