The ECB is wrong about Bitcoin: It’s central banks that are unfair
2024-10-25

Central bankers are claiming that Bitcoin is unfair. In doing so, they’re laying the foundation for high tax rates on Bitcoin — from mining to capital gains taxes — and even an outright ban. 
But most of the economic evidence — even in papers they themselves publish — suggests that the central bankers are the true cause of our suffering via money printing and inflationary policies and settings.
The ECB argues Bitcoin is unfair
In a new paper by the European Central Bank (ECB), Jürgen Schaaf argues that Bitcoin is inherently unfair.
“In absolute terms, early adopters exactly increase their real wealth and consumption at the expense of the real wealth and consumption of those who do not hold Bitcoin or who invest in it only at a later stage,” writes Schaaf.
Schaaf, who is an Advisor to the Senior Management of Market Infrastructure and Payments, argues that the wealth of Bitcoiners was stolen from non-Bitcoiners. 
“The new Lamborghini, Rolex, villa, and equity portfolios by early Bitcoin investors…are financed by diminishing consumption and wealth of those who initially do not hold Bitcoin,” he writes.
Instead of holding the inflationary policies of central banks responsible for perceived asset misallocation and general misery, he suggests Bitcoin will create economic despair.
“This redistribution of wealth and purchasing power is unlikely to occur without detrimental consequences for society,” he writes. 
According to Schaaf, non-Bitcoiners should oppose Bitcoin and even work toward legislation against it, aiming to prevent a rise in the price of Bitcoin “or to see Bitcoin disappear altogether.” 
Even while arguing for redistribution away from Bitcoiners, Schaaf argues it’s Bitcoiners are the ones doing the redistributing. 
The paper also touches on Bitcoin’s inelasticity — the inability for more Bitcoin to be created — in the form of a graph illustrating how little Bitcoin will be available for late adopters.
The Bitcoin community lambasted the paper, with some, like Tuur Demeester, viewing it as a declaration of war. 
On X, Schaaf further expounded on his theory. “Early holders’ wealth and consumption rise while others get poorer, regardless of whether they ever own Bitcoin,” he writes.
Quantitative Easing
While Schaaf blames Bitcoin for economic dislocations, there is perhaps more evidence that central bank financial engineering wreaks more havoc on fiat-holding non-Bitcoiners than does Bitcoin.
For instance, quantitative easing policies — often labeled “money printing — might have increased the price of stocks, bonds, and other assets in the hands of the wealthy.
In a report by the UK Parliament House of Lords Economic Affairs Committee called “Quantitative easing: a dangerous addiction?” — the committee examined QE in response to the 2008 Global Financial Crisis. 
“The policy has also had the effect of inflating asset prices artificially and this has benefitted those who own them disproportionately, exacerbating wealth inequalities that are exacerbated in economic downturns,” reads the report.
Furthermore, in a paper published by the University of Massachusetts, the authors examined the effect of the Federal Reserve’s quantitative easing policy on income and wealth inequality.
“The impact of quantitative easing on the distribution income was at least modestly regressive,” the authors wrote. 
They conclude that QE led to “modest increases in inequality despite having some positive impacts” on employment and the refinancing of mortgages.
Ultimately, the true effects of quantitative easing may be unknown to even the high sages of economics in their ivory towers.
“The effects of quantitative easing are poorly understood, in part because standard models of monetary policy predict that it doesn’t work,” wrote Vincent Sterk and of University College London.
Inflation
A paper for Massachusetts Institute of Technology (MIT) highlights an international poll of 31,869 respondents in 38 countries. 
“…[T]he disadvantaged on a number of dimensions—the poor, the uneducated, the unskilled (blue-collar) worker—are relatively more likely to mention inflation as a top concern…” 
Moreover, in a survey by the Census Bureau’s Household Pulse Survey finds that inflation hurts low-income households the worst. For instance, they spend more of their income on food, gas, and rent where inflation is higher than average. Low-income households cannot buy cheaper goods or more generic bands, like the middle-income households, since they generally are buying cheaper goods.
Schaaf fails to convince us that Bitcoin will be the cause of our economic suffering. Academia and even central banks have meanwhile presented all the evidence necessary to suggest that perhaps Schaaf and his colleagues are the problem. 
Perhaps, non-Bitcoiners “should realize that they have compelling reasons” to oppose central banks?
Kadan Stadelmann is a blockchain developer, operations security expert and Komodo Platform’s chief technology officer. His experience ranges from working in operations security in the government sector and launching technology startups to application development and cryptography. Kadan started his journey into blockchain technology in 2011 and joined the Komodo team in 2016.