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The whole point of money is to NOT know your customer

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I really did not want to write about this article on the ECB’s website but, after so much coverage (including our discussion on this week’s FU), I feel I have to.

So, the ECB say bitcoin is irrelevant.


Well, on the back of the collapse of Terra-Luna, Three Arrows Capital, Celsius, FTX, BlockFi and more, along with a 70%+ drop in the price of bitcoin, you can write it off. Ulrich Bindseil, Director General of the ECB, alongside Jürgen Schaaf, an adviser ...

... cite various reasons why bitcoin is dead.

First, because bitcoin is rarely used for legal transactions.

So they claim it’s only used for illegal transactions?

I’ve heard this for over a long time amongst banks and central banks and yet the reality is the opposite. bitcoin is not used for illegal transactions as much as cash. From Hailey Lennon on Forbes:

The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume).

According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using cryptocurrency transactions is much smaller than fiat currency and its use is going down year by year.

Second, regulation can be misunderstood as approval.

The claim here is that the regulatory structures and financial market players have given cryptocurrency credibility by allowing companies and citizens to trade in them. This is not true. Everywhere I’ve looked, central banks and banks claim it’s a Ponzi scheme and be prepared to lose all your money. If companies and citizens are stupid enough to no understand risk, then isn’t that their problem?

Cryptocurrencies are volatile, unregulated, open to errors and hacks, and may be discontinued. If you don’t know this, you shouldn’t be trading in them.

Third, the Bitcoin system is an unprecedented polluter.

It is. Dependent upon who you read, bitcoin mining is destroying Earth. Carbon emissions for mining a single bitcoin rose from 0.9 tons in 2016 to 113 tons in 2021—a 126-fold increase – according to the Smithsonian.

This is well documented, but also a narrative that is being solved. Just look at the move of Ethereum from proof-of-work to proof-of-stake if you want to know more. The problem is that staking undermines the principles of a libertarian coin. Chris Bendiksen, research lead at digital assets investment company CoinShares, summarises it well in The Guardian:

“The problem with proof-of-stake is that it’s not trustless and it’s not censorship-resistant, and it’s not objective. There’s no real difference from a high-level perspective between proof-of-stake and consensus shareholder capitalism… Proof-of-stake is not a replacement for proof-of-work, it’s just a return to the pre-bitcoin system.”

So yes, there is something in this one, but hopefully this will get resolved one day soon.

Now, I should note that the article being referred to is not official ECB policy:

The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

… and yet they do reflect the views of ECB’s President, Christine Lagarde, who has regularly come out of her office to bleat about how dangerous cryptocurrencies are, and that everything should be based upon digital fiat currencies.

Anyways, the blog caused a flurry of responses. One of the best for me is by George Kaloudis on Coindesk:

“The post starts with an unsubstantiated (which was never substantiated later) point that bitcoin’s current price action is “an artificially induced last gasp before the road to irrelevance.” But what can be asserted without evidence can also be dismissed without evidence. So, let’s dismiss this point.

“The next section in the ECB post is titled: “Bitcoin is rarely used for legal transactions.” Unfortunately, the body of the section doesn’t prove this point specifically (a shame, really, because it isn’t true) and instead focuses on how bitcoin’s value is based solely on speculation.”

The Financial Times accuses the ECB of making a two-footed, studs-up tackle on the crypto community and interestingly notes that, on the subject of regulating crypto, they think it should just be left to burn itself out.

There are many others summarising commentary about this but, in an interesting nuance, I enjoyed this article stating that bitcoin is actually the rediscovery of money.

“If your money requires permission to be spent, it is not your money. If your money has counterparty risk, it is not money—but credit. If your money steals from you, it is not your money—but a control and financing mechanism of your government. If your money requires identity, it is not money but a social credit score system.

“Money has no yield.

“Money has no counterparty risk.

“Money is not credit.

“Money does not need to grow.

“Money doesn't require identity.

“Money has no memory.

The whole point of money is to not know your customer”.

Meanwhile, the ECB article is just yet another in the bitcoin is dead series and a repetitive plea that bitcoin is bad but blockchain is good. I’ve heard that since 2009 and it’s boring.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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