ECB says Bitcoin is 'economically insignificant'

Posted in: Archive
March 25, 2014 11:05 AM UTC

ECB member Yves Mersch called Bitcoin ‘unimportant’ in a prepared speechn, saying “it won’t affect ECB policies because of its insignificance.”

We have seen several countries taking a stance on Bitcoin in the past few months. Some would rather see it disappear while others carefully embrace the concept. Today, the European Central Bank issued a remarkable statement.

Economically unimportant

The European Central Bank (ECB) has always remained silent on the topic of virtual currencies. Strange because, as a European, I know how the ECB likes to have an opinion on all financial things happening on the continent. One would think the growing adoption rate of Bitcoin would urge the European monetary authority to take a stand on this. Especially given the fact that we’re talking about Bitcoin here, a virtual currency that authorities tend to find controversial.
This changed on Monday, when ECB board member Yves Mersch delivered a prepared speech to a conference held by the Bank of Italy in Rome. Everyone was expecting another speech on how dangerous cryptocurrencies are and why people should steer clear of Bitcoin and the exchanges. Imagine the surprise when Mersch called Bitcoin economically unimportant.
“Bitcoin has gained significant value recently. Even so, the ECB stands by its 2012 report where it concluded that these alternative currencies still remain economically unimportant.” Said Mersch. This statement means that the ECB won’t change any of the bank’s policies because of the presence and usage of Bitcoin.
“In Europe, virtual currencies do not pose a risk to price stability or financial stability,” said Mersch. “Nevertheless, we are closely following developments and keeping in touch with other authorities.” He added that they “are an interesting phenomenon and should not be ignored or dismissed.”
After calling Bitcoin unimportant, ignoring the size of the cryptocurrency’s growth over the last year, he started on the obligatory words everyone was waiting for. “The ECB wants to repeat what other banks have said already. We want to warn people about Bitcoin. Speculation, security vulnerabilities and price volatility pose significant risks to consumers and investors.” said Mersch.
The Federal Reserve and the Treasury Department have confirmed what Mersch said in his speech. They also put focus on ‘Bitcoin’s insignificance’ to monetary policies, claiming this is the main reason the United States haven’t regulated Bitcoin yet.

Not all bad news

It seems some authorities are going with this ‘we don’t really care’-approach now. Calling Bitcoin unimportant and claiming it poses no threat whatsoever to the banking system could take it out of the spotlight. When you want something to lose its appeal, you simply make it abundant. Most Bitcoin fanatics will see through this, but maybe other people won’t.
The ECB and Federal Reserve are not the only authorities talking about Bitcoin at the moment. Last week, Thailand warned its people (again) for the potential risks involving Bitcoin; Columbia may be banning Bitcoin and China wants to strengthen oversight of Bitcoin. This last one was, wrongly, interpreted by the community as a ban on all Bitcoin transactions and pushed Bitcoin value down. Price volatility may be what governments are warning for, but it seems the authorities themselves are often cause of it.
Not all news is bad though. The Netherlands, for example, take a rather positive stance towards virtual currencies. They’re not openly shouting how good the concept is, but with initiatives like Bitcoin Boulevard in The Hague and a minister who openly dismisses an appeal to ban Bitcoin, it’s clear that the dutch don’t see Bitcoin as a threat. Australia shows Bitcoin can be great for business as well. With these recent developments in mind, the ECB’s stand on Bitcoin seems a little ignorant.

Last modified: June 14, 2020 9:25 AM UTC

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Christoph Marckx @cryptomaniacs

Internet addict and virtual currency aficionado living in Belgium. I work in a school, where I am responsible for every computer and the entire network that keeps our students connected to the world. I love cryptocurrencies, mostly because it gives us a chance to take back our freedom. If we do this right, there are exciting times ahead!