The European Central Bank (ECB), the central bank for the Eurozone, is unwittingly boosting the case for cryptocurrency adoption, the community believes – and that’s exactly the last thing they want to be doing. This comes after they said they could always create money, and the crypto community was quick to reply with accusations of scamming.
The bank had started a Twitter thread under the hashtag #AskECB, and Twitter user @Gianluca844 took the chance to ask, “Where did you get the money for the [quantitative easing]?” The bank replied:
Praet: As a central bank, we can create money to buy assets #AskECBGianluca Nervegna@Gianluca844Where did you get the money for the QE? #AskECB1,7984:42 PM – Mar 12, 2019Twitter Ads info and privacy2,091 people are talking about this
The quote was attributed to Peter Praet, executive board member and chief economist of the ECB.
Quantitative easing (QE), also known as large-scale asset purchases, is an expansionary monetary policy whereby a central bank, which is the ECB in this case, buys predetermined amounts of government bonds or other financial assets in order to stimulate the economy and increase liquidity.
This operation started in 2015 and was finished by the end of 2018, during which the ECB has spent EUR 2.6 trillion (USD 3 trillion), buying up mostly government but also corporate debt, asset-backed securities and covered bonds, at a pace of EUR 1.3 million a minute, according to Reuters. That equates to roughly 7,600 euros (BTC 2.23) for every person in the currency bloc.
The cryptocurrency community took issue with the reply, with many tweeting gifs of the Bitconnect Ponzi scheme, which has since its downfall become synonymous with shady doings.
“Central banks are marketing bitcoin better than we can,” replied Twitter user @zackvoell, while user @wiz has more to say: “The world is now opening their eyes to your scam of robbing people of their purchasing power by endlessly printing bank notes on worthless paper. The global economy will implement a new Bitcoin standard to opt-out of your scam and prevent further theft by central banks.”
“As a reminder, when central banks and governments decide to simply print more money, they are stealing wealth from majority of the population and enriching the elites. According to the [International Monetary Fund], inflation is one of the leading causes of income inequality in the world,” Anthony Pompliano, co-founder and partner at Morgan Creek Digital, a digital asset management firm, wrote in his newsletter.
He went further to explain that “inflation leads to rising prices for real assets (real estate, etc), which are owned by the elites generally.”
“Central banks may be able to print more fiat dollars, but eventually the Ponzi scheme will end. When it does, Bitcoin will be there, as scarce as ever, with the inability for anyone to print more,” the famous Bitcoin bull concluded.
An interesting point was raised by user @spiroseliot, who tweeted a picture of a street, supposedly in Venezuela, filled with paper money that was rendered worthless due to the country’s recent hyperinflation.
Praet: As a central bank, we can create money to buy assets #AskECB
One of the main points that Bitcoin proponents raise as an advantage over central bank policies is the fact that Bitcoin is capped at 21 million units, which means that in times of shortage, it cannot be printed, which prevents inflation. However, due to the laws of supply and demand, the price of individual bitcoins would rise. Additionally, due to its decentralized and mathematically specified nature, the asset cannot be controlled by any given entity.
On the other hand, the QE was launched as a way to prevent sub-zero inflation from further hitting an economy still reeling from the euro zone debt crisis in March 2015. While it did lift economic growth, helping the rise of wages and lending while keeping inflation subdued, the ECB has also been criticized because the bond buying has depressed interest rates and hurt European banks’ profitability.
Meanwhile, the Basel Committee, the primary global standard setter for the prudential regulation of banks, stressed that “crypto-assets” [that] are at times referred to as “crypto-currencies”, do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value.
“Crypto-assets are not legal tender, and are not backed by any government or public authority,” the Committee said in an announcement today.
“They present a number of risks for banks, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks,” it added.