On Wednesday, a top German central banker told a conference in Frankfurt that replacing cash with bitcoin and similar cryptocurrencies is too risky and inefficient to be an effective medium of exchange.
“For a stable monetary and financial system, we need no crypto-tokens, but rather central banks obligated to price stability and effective banking regulation, and we have both in the eurozone,” Jens Weidmann, the head of the Bundesbank, said.
His remarks (German) come as other top European bankers are making aligned public statements expressing skepticism about bitcoin and related digital currencies. On Tuesday, the ECB put out a graphic dubbing bitcoin not a currency but a “speculative asset.”
Carl-Ludwig Thiele, a member of the executive board of the Deutsche Bundesbank, recently slammed bitcoin for being too “energy intensive.”
“The website Digiconomist estimates that the entire bitcoin network currently consumes just over 46 terawatt hours of energy every year,” he wrote in an op-ed in the Frankfurter Allgemeine Zeitung, a major German newspaper, on February 4.
“This is almost as much as the annual energy consumption of Portugal, with its population of roughly 10 million. Simply settling a transaction in the bitcoin network consumes around 427 kilowatt hours. This amount of energy is enough to supply an average German four-person household with electricity for more than a month. By way of comparison, just settling a standard SEPAtransfer (without the payer initiating the transfer or checking their account balance on a PC or smartphone) takes less than one watt-hour. On the whole, the Bundesbank estimates that settling a bitcoin transaction uses roughly 460,000 times as much electricity as a normal transfer.”
Meanwhile, a European Central Bank official, Yves Mersch, told Bloomberg on February 6 that the ECB is more concerned about the “social and psychological effect” that cryptocurrencies have had on some people.
“In this respect, money has to do with confidence, and that’s why we, central bankers, feel that we have a certain role to play to preserve confidence of the public in our legal tender,” he explained. “There is so much money flowing in that it’s like a gold rush—but there is no gold.”
Or put another way, Mario Draghi, the president of the ECB, indicated Tuesday that bitcoin is too volatile to be useful. The statement came in response to a question sent by Twitter from an Italian student as to whether young Europeans should invest in bitcoin.
Draghi seemingly dismissed it, saying: “A euro today is a euro tomorrow.”
“The value of bitcoin oscillates wildly,” he continued. “Of all things I would not call bitcoin a currency for this reason and also for another reason. The euro is backed by the European Central Bank, the dollar is backed by the Federal Reserve. Currencies are backed by central banks or their governments. Nobody backs the bitcoin. And by the way, I’ve seen that many of you posted questions as to whether the ECB is going to ban bitcoins or regulate bitcoins. I have to say, it’s not the ECB’s responsibility to do that.”