ECB Adviser Slams Bitcoin as "Unsuitable" for Central Bank Reserves

An adviser to the European Central Bank (ECB) has reiterated the bank's negative stance on Bitcoin, as the US explores the creation of a strategic Bitcoin reserve. Jürgen Schaaf, an ECB adviser, told Cointelegraph that nation-state Bitcoin reserves are a risky idea, arguing that there is "no real economic need for Bitcoin" because the cryptocurrency has "no real economic necessity or relevant usage." Schaaf's position aligns with recent remarks by ECB President Christine Lagarde, who expressed confidence that BTC would not enter European central bank reserves in late January.

Schaaf pushed back on the idea that the ECB should add BTC into its reserves, stating that different types of strategic reserves exist, such as the stockpiling of raw materials, which can be released during crises to avoid higher prices for imports. He also mentioned sovereign wealth funds, which invest national savings in countries with structural balance-of-payments surpluses and low debt. However, Schaaf noted that in the US and Europe, reducing public debt takes precedence over profitable investments.

Schaaf highlighted several reasons why Bitcoin is an "unsuitable asset for central banks," including extreme volatility, illicit use, and susceptibility to manipulation. He argued that adding Bitcoin to the ECB reserves would not stabilize the single currency but would merely fuel speculation and wealth redistribution. Schaaf also rejected the idea of central banks holding not just Bitcoin but also other cryptocurrencies as reserve assets, stating that adding multiple cryptocurrencies would only amplify these issues, increasing volatility and exposure to speculative assets with often no fundamental economic utility.

Schaaf's remarks came amid the crypto markets facing a massive wave of volatility, with analysts recording $1.5 billion in crypto liquidations over the past 24 hours. While Schaaf sees public debt reduction as separate from potential reserve investments, some Bitcoin advocates argue that BTC could help governments manage their financial burdens. In December, asset management firm VanEck estimated that the US could reduce its national debt by 35% in the next 24 years if it created a reserve of 1 million Bitcoin. The estimation came in line with a bill proposed by Senator Cynthia Lummis, who has been pushing the state Bitcoin adoption as a tool to address trillions in the US debt for years. However, some skeptics have questioned whether the Bitcoin accumulation by the US government could help fix the $35 trillion debt that has been rising