A European Central Bank (ECB) paper published earlier this month, which stopped just short of labeling Bitcoin a Ponzi scheme, has faced strong backlash from a group of crypto academics.
The paper criticized Bitcoin’s volatility, limited productive contribution, and wealth concentration, calling them significant flaws, according to Murray Rudd of the Bitcoin advocacy organization Satoshi Action Fund.
In a detailed rebuttal released on Oct. 22, the academics critiqued the Oct. 12 ECB working paper authored by Ulrich Bindseil and Jürgen Schaaf, which sparked outrage among cryptocurrency supporters.
The rebuttal argued that “methodological weaknesses and personal or institutional biases” undermined the ECB paper’s credibility and failed to provide a balanced analysis of Bitcoin’s utility or future prospects.
Rudd noted that the ECB’s assessment dismissed Bitcoin’s long-term viability and societal benefits, while promoting central bank digital currencies (CBDCs) as a superior alternative for modern financial systems.
Rudd also claimed that the ECB report misrepresented Bitcoin’s primary purpose by stating it had shifted from a payment method to an investment vehicle. Additionally, he said the authors misunderstood Bitcoin’s technological foundations, particularly in relation to proof-of-work and decentralization.
“By focusing on the early limitations, Bindseil and Schaaf fail to acknowledge the significant progress made in improving its scalability and efficiency,” Rudd added.
The rebuttal highlighted flawed arguments, including claims about wealth concentration, which ignored that many large wallets belong to exchanges managing funds for millions of users.
The ECB’s critique of Bitcoin’s volatility was also deemed shortsighted, as it failed to recognize volatility as a characteristic typical of early-stage technology adoption.
Rudd argued that the paper overlooked Bitcoin’s utility as a store of value and dismissed the broader implications of inflation within traditional financial systems, using the U.S. dollar’s declining purchasing power as an example.
The rebuttal also pointed out a conflict of interest, noting the ECB authors’ involvement in developing a digital euro.
“Given the ECB’s strategic focus on developing a CBDC, it is reasonable to infer that the authors, at best, have a vested interest in portraying Bitcoin as an inferior, speculative asset,” the rebuttal stated.
The academics emphasized Bitcoin’s potential benefits, such as financial inclusion, cross-border payments, and innovations in energy efficiency.
Responding to the criticism, Bindseil noted that the rebuttal seemed to broadly defend Bitcoin rather than address specific points from the October 2024 paper. Schaaf also denied that their paper promoted CBDCs as a superior solution, stating that CBDCs were not even mentioned.
