European Central Bank Calls for Regulation or Ban of Bitcoin
According to a report from the European Central Bank (ECB), early investors in Bitcoin are “unfairly” profiting from latecomers. The central bank explains that the decentralized nature of Bitcoin and supply cap have resulted in a function where investors who purchased the virtual currency low could sell it at a higher value, at the expense of newer investors.
Wealth Inequality and Social Unrest
We worry that this structure implies extreme wealth inequality and could foment significant social unrest. Based on these concerns, the authors make the case that non-holders have reason to actively oppose Bitcoin and encourage legislation aimed at preventing further price appreciation or even outright banning the cryptocurrency in extreme cases.
At current trends, Bitcoin could be headed for a haves and have-nots system,” the report says, recommending steps that would dampen such a perceived “unfair” wealth transfer.
Criminal Activity and Bitcoin’s Role
The paper further refers to studies that are associating Bitcoin with crime due to its adoption in criminal transactions. This narrative is disputed by other reports, including a U.S. Treasury study this May 2024, and indicates that traditional fiat currencies remain the most common medium for illicit activities.
Negligence of Bitcoin’s Role as an Inflation Hedge
Critics say the paper is lacking in broader inflation context. Since its inception in 2009, Bitcoin has risen enormously as supply is limited, and there is almost no control over the increased supply of money by the central banks across the globe. This state has seen Bitcoin grow as a potential hedge against fiat currency devaluation in light of rising public debt and inflation.
Bitcoin Gaining Traction Among Investors
It seems the allure of Bitcoin only continues to grow, even at a time of concern by the ECB. A survey from Charles Schwab this year reported that 45% of US investors planned to invest in cryptocurrency via ETFs-with interest in Bitcoin far outpacing those in bonds and alternative assets. Millennials are showing strong interest, too-62% plan to commit part of their portfolio to crypto investments.
Conclusion: A Divided Future for Bitcoin?
With Bitcoin’s growing popularity and widespread use as an inflation hedge, the less likely it is that global interest in the cryptocurrency will abate anytime soon. While the ECB warns of the dangers of Bitcoin, growing use and popularity as a hedge against inflation make it unlikely that global interest in the cryptocurrency will wane anytime soon. Whether governments will heed the ECB’s call for stricter regulation or a ban remains to be seen.
