Central banks fear Bitcoin

A piece of news that has been sadly under-reported is that the European Central Bank (ECB) has called for tightened rules on digital currencies such as Bitcoin. The reason, according to Reuters is a fear that they “might one day weaken its own control over money supply in the euro zone”. (Link»)

The European Commission has been fairly relaxed when it comes to digital currencies, being aware of the dynamic evolution of Blockchain-based electronic money. It seems the Commission realizes there is no way the Brussels bureaucracy can grasp or foresee all the different ways Bitcoins can / will be used and the technical development. (The EU, however, demands that identity must be proven when changing electronic currencies for fiat money.)

However, this opinion from the ECB might change that. After all, the EU is struggling to keep the common European currency – the Euro – afloat.

While the ECB is “printing” money as mad, Bitcoin has a known volume growth rate and a given maximum volume. The real value of the Euro is slowly decreasing with inflation, while (despite its volatility and other problems) the value of Bitcoins seems to slowly be on the rise.

If nothing else, this exposes how central banks are robbing the people, by stealth. Clearly, that is not popular with central bankers.

We also know from the Euro crisis that the ECB and national central banks are prepared to take drastic steps to protect the Euro. Greece has seen closed banks and limits on ATM withdrawals. In Cyprus, the public had a portion of its bank savings confiscated. In this perspective, the Euro has lost much of its trustworthiness against e.g. Bitcoin.

And it doesn’t have to be Bitcoin or Ethereum. Chances are that someone sooner or later will create a new digital currency that has learned from the problems and mistakes made by its predecessors, winning wider public trust and acceptance.

But no government and no central bank can end the development of digital currencies. There might be government Luddism and some countries will try to outlaw them. But Blockchain-based digital money cannot be stopped. And there will always be a demand.

In the long run, the ECB might very well be right. Central banks risk losing control over money supply. But that is not because digital currencies are a bad idea. Rather the opposite. It’s because inflation, debt, and centralized systems are undermining the confidence in state-issued fiat money.


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