FRANKFURT, GERMANY – JUNE 13: A huge euro logo is seen in front of the headquarters of the European … [+]
Recent actions from central banks and governments have raised questions about whether a coordinated effort exists to suppress bitcoin. The European Central Bank’s recent working paper, The Distributional Consequences of Bitcoin
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Dr. Murray A. Rudd, Allen Farrington, Freddie New, and Dennis Porter—respected figures in academia, economics and policy—have issued a rebuttal, describing what they argue are flaws and biases in the ECB’s analysis, challenging its portrayal of bitcoin’s economic and social impacts.
The ECB’s Claims On Bitcoin
The ECB paper argues that bitcoin’s appreciation is increasing wealth gaps, benefiting early adopters at the expense of latecomers. It mentioned bitcoin’s volatility, dismissing it as a speculative asset with little to no productive economic contribution. The paper also positions Central Bank Digital Currencies as a preferable alternative to bitcoin, suggesting they provide stability and financial inclusion.
This account paints bitcoin as a destabilizing force that could undermine the economic status quo. However, critics argue that the ECB’s analysis misrepresents bitcoin’s evolution and role in the financial system.
Rebuttal To The ECB
Rudd, Farrington, New, and Porter detail several flaws in the ECB’s assessment. Dr. Murray Rudd, Science Advisor at Satoshi Action Fund, stressed the importance of refuting the ECB’s conclusions, stating, “This critique is essential to ensure that the flawed assumptions and biases in the Bindseil and Schaaf working paper do not go unchallenged, especially as it may soon undergo peer review at an academic journal. By making our counterarguments publicly available, we aim to provide a balanced perspective that can inform editors, reviewers, and the broader public about the significant limitations of their analysis on bitcoin and CBDCs.”
The paper’s focus on bitcoin’s volatility overlooks that bitcoin, like gold, functions as a store of value. They argue that the rise in bitcoin’s price is a sign of increasing recognition of its role as a hedge, not speculation.
Freddie New, Head of Policy at Bitcoin Policy UK said, “It’s unfortunate that the authors of papers such as this habitually fail to review new research and developments in the space – for example, bitcoin’s increasingly important role for activists working in repressive regimes, where no other means of payment may be available, or simply in offering cheap, fast, and secure cross-border remittances. A failure to do any up-to-date research really devalues the worth of any such paper.”
They also argue that the ECB fails to properly distinguish bitcoin from the wider cryptocurrency market. While the crypto industry may include speculative projects, bitcoin stands apart as a decentralized protocol. The rebuttal says that bitcoin is not driven by a central entity or company, which makes it fundamentally different from other digital assets.
Global Taxation And Control
The ECB’s stance on bitcoin is not happening in isolation. The Minneapolis Federal Reserve recently introduced policies that could be seen as a tax on wealth to maintain government spending, while France has moved toward citizen-based taxation. G7 countries are discussing global tax frameworks that could complicate bitcoin ownership.
These efforts could suggest a wider strategy by governments to retain control over monetary systems by restricting access to decentralized assets like bitcoin. This approach mirrors what many in cryptocurrency have dubbed “Chokepoint 2.0” — a coordinated effort to cut off bitcoin’s access to financial systems and services.
Allen Farrington, from Axiom, commented, “Bitcoin is clearly superior to fiat when comparing the basic qualities of both as potential forms of money. So, it’s no surprise that those benefiting from the fiat system oppose it. However, it’s frustrating that instead of presenting their case openly, they often resort to spreading misunderstandings and contradictions about bitcoin. This rebuttal aims to correct those misrepresentations as thoroughly as possible.”
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CBDCs vs. Bitcoin
One of the most critical points raised is the ECB’s favorable stance on CBDCs. The ECB presents CBDCs as a solution to the instability it claims bitcoin creates. The response raises concerns about the centralization of power and surveillance risks that CBDCs could introduce. Being decentralized means bitcoin offers a different kind of security that protects individuals from government overreach and censorship.
Dennis Porter, CEO of Satoshi Action Fund, stated, “CBDCs can never be as inclusive as bitcoin because bitcoin allows anyone to join its network regardless of race, color, sex, religion, political beliefs, credit score, housing or immigration status. Bitcoin simply doesn’t allow for discrimination.”
Promoting CBDCs can be seen as another facet of Chokepoint 2.0. Centralized financial institutions push for digital currencies they control while attempting to suppress bitcoin through regulation, taxation, or prohibition. By positioning CBDCs as the “safe” alternative, central banks aim to maintain control over the financial system, steering users toward a model that offers less freedom than bitcoin’s decentralized network.
The rebuttal points out that the ECB’s argument ignores bitcoin’s potential for financial inclusion and innovation, particularly in areas where traditional banking is failing. Bitcoin’s decentralized structure provides opportunities for cross-border payments and serves as an alternative for those in inflationary economies.
Flawed Arguments
The rebuttal also addresses the ECB’s claim that bitcoin is a tool for wealth concentration. This argument fails to account for the increasing participation of retail investors and the distribution of bitcoin across exchanges. Many of the largest wallets belong to exchanges holding assets on behalf of millions of users, rather than a few wealthy individuals. Bitcoin’s distribution is widening as more people recognize its value, contesting the idea that it is a tool for a few.
The argument that bitcoin’s price appreciation does not contribute to productivity is also critiqued. It references bitcoin’s role in driving technological innovation, particularly through advancements in blockchain, cryptography, and energy efficiency in mining technology. These contributions are dismissed by the ECB, which focuses solely on price volatility without considering the wider economic impacts of bitcoin’s growth.
Implications Of Central Bank Actions
The rebuttal suggests combining policies and narratives emerging from central banks and governments, which points to a coordinated effort to undermine bitcoin’s influence. It provides a defense of bitcoin’s value as a decentralized, global asset. It disputes the ECB’s framing of bitcoin as a destabilizing force and questions the promotion of CBDCs as a more stable alternative.
Bitcoin’s independence from state control appears to be at the heart of the debate. This independence is not a flaw but a feature that could provide financial sovereignty in a world increasingly dominated by centralized control.
