To us, the ECB’s superficial, amusing take on BitCoin was merely a source of (Friday) humor.
To others, such as Tuur Demeester, the ECB’s report on “Virtual Currency Schemes” which was merely a confused attempt to validate the Euro by bashing a prototype electronic currency that others have written far more informed articles on, has far more profound insights into central banker mentality.
We are skeptical: the ECB has far more existential issues to worry about than whether people will be paying for that house in Calabria with BitCoin (they won’t; at least not any time soon), such as how fast until Spain and Greece run out of rehypothecatable and repoable assets, that allow the ECB to continue creating its own version of electronic money (in this case named Euro) out of thin air.
But for those seeking more than what meets the central-planner’s eye (because what better ploy than to divert attention from where it truly needs to be focused: such as Spanish bonds for example getting a 0% haircut instead of 5%), here are some answers to the question whether “the CB’s toolbox have what it takes to contain a private, decentralised cryptocurrency? Or: Bitcoin seen through the eyes of a central banker.”
From Tuur Demeester: “The Gloom Of Central Banking”
On october 29th, the ECB published a 55-?page report titled “Virtual Currency Schemes”. With this dysphemistic title, the central bank refers to private, unregulated initiatives of virtual currency. With 183 references in the text, it seems obvious that specifically the fast growing peer to peer currency Bitcoin is under scrutiny.
In what follows, I sketch an evolution of how central banks—the monopolists of the current fiat money paradigm—have dealt with the threat of free market competition coming from the internet, and how they are now reacting to the sudden appearance of an enigmatic rival.
Be warned that this is a subjective take on the issue. People from central bank and government circles will no doubt accuse me of being unbalanced and unfair in my interpretations and conclusions. So be it. my goal here is to scrape off the veneer of these reports and thus catch a glimpse of what may actually be happening behind the closed doors of Basel and Brussels.
Full report (pdf)
Full report (pdf)