Industry Updates

European Central Bank: Bitcoin ETFs ‘the naked emperor’s new clothes’

ECB said price boom damage will be massive

Lauren Gibbons

European central bank euro symbol

The European Central Bank (ECB) has said the spot bitcoin ETF approval in the US earlier this year has not validated cryptocurrency as a good investment strategy.

In a blog post, the ECB warned the damage from the bitcoin price boom "will be massive" and has called the Securities and Exchange Commission’s (SEC) approval of spot bitcoin ETFs “the naked emperor’s new clothes”.

The ECB disputed claims that the SEC’s approval of spot bitcoin ETFs earlier this year means it is a safe investment as well as disagreeing about the crypto’s inherent value.

Bitcoin’s rally throughout 2023 and into 2024 was buoyed by first a slowing down and then a pausing of the Federal Reserve’s interest rate hikes, generating an increased risk appetite among investors.

This is continuing along a similar trajectory in 2024, with the Fed expected to cut interest rates three times this year as US inflation continues to drop from 40-year highs.

Bitcoin’s price skyrocketed 164% to $42,500 last year and has risen 18% so far in 2024.

The ECB was firm on their stance on the SEC’s approval and subsequent rally, with ECB director general for market infrastructure and payments Ulrich Bindseil and adviser Jürgen Schaaf stating they “reiterate that the fair value of bitcoin is still zero”.

ECB also implied the false sense of security provided by the SEC’s approval might be mirrored in Europe through the Markets in Crypto Assets Regulation (MiCA).

The regulator aimed to curb fraudulent issuers and traders of crypto units last June, “despite the initial intentions towards genuine crypto assets, an eventual focus on stablecoins and service providers, although without regulating and constraining bitcoin per se”.

The ECB’s stance comes after inflows into crypto ETPs doubled year-on-year to $2.3bn in 2023, up from $830m in 2022, according to CoinShares data.


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