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European Central Bank says

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The European Central Bank said on Wednesday that bitcoin is being artificially supported and should not be legalized by regulators or financial firms because it is akin to gambling.

bitcoin and others Digital currencies It has been presented variously as an alternative form of money and a shield from the inflationary policies pursued by major central banks such as European Central Bank In the last years.

But a 75 percent drop over the past year, just as inflation reared its head, and a series of scandals including the collapse of FTX The exchange this month gave critics of central banks and regulators ammunition to fight back.

Bitcoin’s value peaked at nearly $69,000 (roughly Rs. 5,600,000) in November 2021 before dropping to around $17,000 (Rs. 13.81,000) by mid-June 2022, where it is still hovering now.

in blog post Using uncharacteristically stinging language, the European Central Bank said that Bitcoin’s recent stability was the “artificial last gasp before the path to inadequacy.”

“Large bitcoin investors have the strongest incentives to keep the euphoria going,” authors Ulrich Bindseil and Juergen Schaaf write. “At the end of 2020, isolated companies began promoting bitcoin at the expense of the company. Some venture capital firms are also still investing heavily.”

They said venture capital investments in the cryptocurrency and blockchain industry amounted to $17.9 billion (roughly Rs. 1.5 crore) as of mid-July, but did not provide evidence of price gouging.

Regulators around the world are crafting rules for the crypto world, a complex ecosystem that ranges from stablecoins that are supposedly backed by traditional currencies to forms of lending that happen on a blockchain, or distributed ledger, that backs those currencies.

The ECB’s blog said regulation could be “misunderstood for approval”.

“Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should not be treated as unregulatory and therefore not legalized,” Bindseil and Schaaf said.

In an email to Reuters, Bindseil said the best way to frame cryptocurrencies is to bet or gamble by regulators.

The authors added in the blog that the participation of asset managers, payment service providers, insurance companies and banks with them encryption “It suggests to small investors that investments in bitcoin are sound.”

“The financial industry should be wary of the long-term harms of promoting bitcoin investments — despite the short-term profits they can bring,” the blog authors said.

The ECB’s words carry weight because it is the supreme supervisor of eurozone banks and has a say in the EU’s financial regulation.

European Central Bank President Christine Lagarde said on Monday that the European Union’s market in crypto-asset code (MiCA), which is in the process of being approved, will likely need expansion in a future iteration of what she called “MiCA 2.”

This was a likely reference to bitcoin, which eludes MiCA because it doesn’t have any legal entity in the EU, meaning only exchange platforms take over the rules.

© Thomson Reuters 2022


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