Today the European Central Bank (ECB) published another article critiquing Bitcoin and cryptocurrencies more generally. The primary gist is that an ETF doesn’t change the ECB’s belief that Bitcoin is unsuitable for investment or payment. However, that was not the most notable point. It asks whether there’s been a misjudgment by authorities regarding regulating cryptocurrencies under pressure from “well-funded lobbyists” and social media campaigns.
One of the authors is Ulrich Bindseil, the Director General of Market Infrastructure & Payments.
“It seems wrong that Bitcoin should not be subject to strong regulatory intervention, up to practically forbidding it,” the authors wrote.
Earlier this week a European Commission adviser, Peter Kerstens, said it would be hard to find a legal basis to ban Bitcoin in the EU Treaty.
Target DAO and Bitcoin administrators
Decentralized autonomous organizations (DAOs) are often used for decentralized finance (DeFi) governance. The ECB pointed to a recent SEC case in the US. The BarnBridge DAO settled after “pressure on its founders”. Hence, it asserts that if you can identify administrators, you can prosecute them. That’s similar to the position of IOSCO, the international body for securities regulators.
The ECB wrote that “this principle also applies to Bitcoin. The Bitcoin network has a governance structure in which roles are assigned to identified individuals. Authorities could decide that these should be prosecuted in view of the large scale of illegal payments using Bitcoin. Decentralised finance can be regulated as forcefully as the legislator considers necessary.”
However, European Commission adviser Peter Kerstens said one shouldn’t assume that the regulation of DeFi will get a lot of coverage in the EU’s MiCA follow up paper.
The ECB also criticized Bitcoin’s energy usage. It highlighted the failure of the EU and US to take steps to address it. In March 2022, during the Regulation on Markets in Crypto Assets (MiCAR) debates, the Greens and S&D political parties attempted to ban blockchains such as Bitcoin, which uses Proof of Work. They lost the vote.
