The European Central Bank criticized the U.S. Securities and Exchange Commission (SEC) for approving a Bitcoin ETF, insisting that the asset’s fair value remains zero.

In a recent blog post, an ECB adviser described the U.S. Securities and Exchange Commission’s approval of a spot bitcoin exchange-traded fund in January as “the naked emperor’s new clothes.”

Advisors such as ECB Director General for Market Infrastructure and Payments Ulrich Bindseil and advisor Jürgen Schaaf have criticized Bitcoin, noting that it is not suitable as an investment or means of payment.

ECB adviser questions Bitcoin's effectiveness

While the approval of a Bitcoin ETF in January was seen as validation for the cryptocurrency and a sign of its future success, Bindseil and Schaaf disagree. The ECB post outlines that for Bitcoin “believers,” the ETF approval validates its security, and the subsequent price rally is proof of its victory.

The two advisers believe Bitcoin’s fair value is zero. They expressed concern about the prospect of another boom-and-bust cycle for the asset, labeling it a bleak outlook with the potential for huge collateral damage, including environmental harm and a redistribution of wealth that disadvantages the less well-informed.

The authors also stressed that Bitcoin transactions remain slow, inconvenient, and costly, adding that the cryptocurrency has few payment uses outside of illegal activities on the dark web. Moreover, even if El Salvador granted it legal tender status, it has failed to establish it as a viable means of payment.

Bindseil and Schaaf argue that regulatory efforts to curb the large-scale criminal use of Bitcoin are ineffective. The cryptocurrency’s price has also faced massive manipulation, while Bitcoin mining using its proof-of-work consensus mechanism is energy intensive and continues to pollute the environment on the same scale as entire countries.

The advisers also stressed that Bitcoin is not a suitable investment because it does not generate cash flow. They said that unlike commodities, Bitcoin lacks utility and cannot provide social benefits. In addition, they expressed concerns that less financially savvy retail investors are being drawn into Bitcoin due to the fear of missing out, exposing them to the risk of financial losses.

ECB's 'last gasp' criticism

The latest criticism follows a November 2022 ECB blog that claimed Bitcoin was approaching its “last gasps” before becoming irrelevant. The comments coincided with a market downturn following the collapse of the FTX cryptocurrency exchange.

In the article, the ECB argues against the premise that Bitcoin is a financial asset destined to continue to soar. However, Bitcoin hit a bear market low of $16,000 a week before the post but has since rebounded strongly, surging 225% to $51,930.

Meanwhile, in response to the question of “why did this dead cat bounce so high,” ECB advisers attributed Bitcoin’s sharp rebound to several factors. They pointed to expectations of a possible shift in the Fed’s interest rate policy, the upcoming Bitcoin halving event in April (which will cut miners’ block rewards in half), and the recent launch of spot ETFs as key drivers of the Bitcoin price surge. #比特币ETF  #欧洲央行