A new European Central Bank (ECB) report has stirred controversy by suggesting that Bitcoin adoption results in a redistribution of wealth from latecomers to early investors.
What Happened: The paper, titled "The distributional consequences of Bitcoin," contends that even if Bitcoin's price continues to rise indefinitely, only early adopters would benefit while latecomers and non-holders would suffer significant consequences.
Authors Ulrich Bindseil and Jürgen Schaaf argue that Bitcoin's original vision as a global payment system has failed, leading to its repositioning as an investment asset.
The economists assert that Bitcoin "does not generate any cash flow (like real estate), interest (like bonds) or dividends (like stocks), cannot be used productively (like commodities)." This makes traditional valuation methods ineffective for Bitcoin.
They argue that Bitcoin's potential for perpetual price increases, promoted by celebrities and business leaders, creates a zero-sum game. Early adopters benefit at the expense of latecomers and non-holders, leading to "a corresponding impoverishment of the rest of society, endangering cohesion, stability and ultimately democracy."
The paper suggests that non-holders have compelling reasons to oppose Bitcoin and advocate for legislation against it. "Latecomers and non-holders and their political representatives should emphasize that the idea of Bitcoin as an investment relies on redistribution at their expense," the authors state.
This stance has drawn criticism from crypto investors. Bitcoin analyst Tuur Demeester called it "the most aggressive paper to come from authorities" in his years of monitoring the space.
Marc van der Chijs, a prominent investor, expressed alarm over these developments on social media.
"Europe seems to be preparing a war on Bitcoiners," he said, citing the ECB report and recent regulatory changes as evidence of growing hostility towards Bitcoin holders in Europe.
"The Overton window is quickly shifting against Bitcoiners (and against wealthy people in general)," Van der Chijs added.
He noted that some Bitcoin holders in the Netherlands have expressed worry about changing regulations.
Why It Matters: The ECB has previously voiced criticism of Bitcoin, saying its fair value is "still zero" and its transactions inconvenient, slow and costly" in a blog post in February.
Its position also aligns with recent regulatory developments in Europe.
Italy has implemented higher capital gains taxes on Bitcoin, while the Netherlands has proposed an exit tax for cryptocurrency holders.