BitCoin Seen Through The Eyes Of A Central Banker

Tyler Durden's picture

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 2012, the European Central Bank published a 55-­?page report titled “Virtual Currency Schemes”. With 183 references in the text, it seems obvious that specifically the fast growing peer to peer currency Bitcoin is under scrutiny.

 

Why in the world, one wonders, would an increadibly powerful financial institution bother to investigate what seems to be nothing more than a complex mathematical puzzle with which a bunch of whippersnappers send packages of bits and bytes back and forth to each other?

 

In what follows, I sketch an evolution of how central banks—the monopolists of the current fiat money paradigm—have dealt with the existence of online free market competition since 1996, and how they are now reacting to the sudden appearance of an enigmatic rival.

 

It turns out not only the ECB but also its more powerful and sophisticated Swiss godfather, the Bank for International Settlements, finds that it has genuine reasons to be on high alert.

 

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)