Economists at the European Central Bank (ECB) are warning about the potential impact of the rise in Bit price on society. They argue that cryptocurrencies have transformed from Satoshi Nakamoto's vision of a global payment system into investment assets.
In a recent paper, ECB's Ulrich Bindseil and Jürgen Schaaf express concern that the rise in Bit's value primarily benefits early investors. This trend can lead to economic hardship for late investors and those who do not hold Bit.
ECB Calls for Action on Bit's Investment Perception
The authors emphasize that some thinkers and celebrities have contributed to the image of Bit as an investment with unlimited growth potential. Figures like Larry Fink primarily view Bit as a financial asset, which is far from the original narrative of 'electronic cash for transactions' put forth by Bit's creator, Satoshi Nakamoto.
New Bit advocates like Fink liken Bit to a finite resource like gold, to be held as a long-term investment, rather than positioning it as a means of payment. This perspective raises questions about the motivations for society to choose Bit as an investment vehicle. Despite the volatility, supporters expect Bit's value to rise over time, providing little social utility.
"In absolute terms, early investors precisely increase their actual consumption and wealth at the expense of the actual consumption and wealth of late investors and non-holders," the ECB economists wrote.
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The paper also notes that early investors can dispose of their Bit holdings to purchase luxury goods, which can disadvantage late investors. This dynamic redistributes wealth to those who entered the market first, potentially exacerbating poverty among non-holders.
"The perception of Bit as an investment implies that the Bit price will continue to rise, meaning that the rest of society becomes relatively poorer, and social cohesion, stability, and ultimately democracy are at risk," the economists argued.
To prevent these risks, Bindseil and Schaaf advocate for strict price controls on Bit. They argue this could prevent the exploitation and potential unrest caused by the unequal distribution of wealth.
They also urge non-holders to recognize the need to oppose Bit. Non-holders are advised to support legislation to curb or eliminate the price increase.
"Late entrants, non-holders, and their political representatives should emphasize that the idea of viewing Bit as an investment depends on redistribution at their expense. Ignoring this can lead to election results favorable to politicians supporting Bit, which means redistribution of wealth and can foster social division," they concluded.
Crypto Community Criticizes ECB
Meanwhile, the ECB's report has faced scathing criticism from industry experts. Market analyst Tuur Demeester warned that the document could empower governments to impose strict taxes and restrictions on cryptocurrencies. He noted that the central bank economists view Bit as an existential threat that must be addressed.
"Many people warned that this would happen. Bit will become a major political fault line in domestic and international elections. Here it is. This means that we HODLers must take action to ensure that the government respects our fundamental property rights."
Read more: How to Trade a Bit ETF: A Step-by-Step Approach
Similarly, Mark van der Chijs, co-founder of the publicly traded Bit mining company Hut 8, expressed concerns about the ECB's stance. He argued that early adopters should not be criticized for their foresight and willingness to take risks.
"I won't be surprised if, in 2025, Bit prices double or triple, and more politicians will oppose Bit and try to overtax it excessively."
