The ECB Is Marketing Bitcoin And Don't Even Realize It

To investors,

Christine Lagarde is the President of the European Central Bank and a previous critic of Bitcoin and cryptocurrencies. This is interesting though as it seems like her position is rapidly changing. Over the last few months, the ECB has started to research the creation of a potential central bank digital currency.

While it is encouraging to see a traditional institution with such legacy and power dipping their toe into this new industry, we didn’t have a lot of information on their thinking until recently. A recent article in Cointelegraph found an interview that was published on January 8th that shed more light on what Lagarde and her colleagues are thinking.

It appears that the main driving force for the change in heart has been a realization that the world is demanding fast and low-cost avenues for payments and/or money transfers. The existing infrastructure obviously doesn’t support this, so the ECB is faced with two options:

  1. Sit back and do nothing.

  2. Try to disrupt the existing system.

We know from historical precedent that it is really, really hard for incumbents to disrupt themselves. This “Innovator’s Dilemma” can be caused by the lack of understanding that change is happening, the inability for leadership to recognize they will eventually be disrupted, or the over reliance on the existing model to continue the status quo. In the case of the ECB, they appear to recognize that change is occurring, but it remains to be seen whether they can get ahead of that trend or they will suffer from the disruption that it brings.

Currently, Lagarde and her team are assessing the pros and cons of a central bank digital currency. In the interview, she said:

“ECB will continue to assess the costs and benefits of issuing a central bank digital currency that would ensure that the general public remains able to use central bank money even if the use of physical cash eventually declines.”

She then went on to set the expectation that no one should expect a short term decision:

“We are working on all aspects of CBDC, with in-depth analysis of costs and benefits of such a new form of central bank money. It will take a while before we will communicate on our conclusions.”

The language she is using here is really interesting. It appears that one of the pre-determined talking points is around “costs and benefits” which would suggest that the ECB is looking at this opportunity from the lens of a business decision.

What resources will be required to build a central bank digital currency? What are the potential benefits? Can we drive more revenue? More transactions? Could we stabilize the Euro and related economies? What are the potential drawbacks? Will people use a central bank digital currency? What do we do with the physical cash notes that are in circulation? How does the banking system react?

All of these questions are rational and appropriate if you are running the European Central Bank. You have to think like a big company. The decisions you make, and their subsequent actions, can have a profound impact on millions of people. If you make bad decisions, you will be publicly pressured and embarrassed. If you make good decisions, people will simply say “they did their job.” In essence, there is much more downside than upside in my opinion.

Now compare that to the launch and early days of Bitcoin. There was no master plan. There was no worry about the impact on millions of people. No one did a costs and benefits analysis. Focus groups were non-existent. There was no marketing department. In fact, no one was paying attention and no one really cared what happened with Bitcoin for quite awhile.

These two strategies couldn’t be in more direct conflict with each other. One is pre-determined, intentional, and feels like a large corporation moving slowly with the goal of not screwing up. The other, Bitcoin, feels like a young startup with nothing to lose.

Neither is necessarily the “right” way to do things, but the startup approach has fewer opportunities to fail. The pressure is lower. And the stakes are nowhere nearly as high as the large corporation. This is the beauty of Bitcoin’s launch.

The product spoke for itself. People naturally discovered it and they chose to use it or not. They weren’t mandated by a government. There was no central bank pitching them on why it was better. Every individual had numerous reasons to ignore Bitcoin, but slowly more and more people gravitated towards it. Eleven years later we are now seeing tens of millions of people adopting the digital currency.

This only happens for one reason — Bitcoin has product-market fit. When a technology finds product-market fit, it is really hard to stop it from growing. People start demanding the product. They seek it out. They find ways to adopt it. They will do this in the face of incredible obstacles and difficulties too.

While many people think the central bank digital currencies are dumb, I actually think they are going to be an important part of the Bitcoin story in hindsight. The ECB is essentially validating the need for Bitcoin by (1) saying that people want fast, low-cost payment infrastructure and (2) admitting that they are going to spend the time to research and potentially build a competing product. Bitcoin would still succeed without the ECB jumping into the game in my opinion, but large central banks are only going to accelerate education and adoption.

Imagine a world where central banks help to onboard hundreds of millions of people onto digital wallets that support various cryptocurrencies. They will do this under the guise that the ECB-issued digital currency will gain adoption, but instead it isn’t a far stretch of the imagination to think that people will gravitate towards the most sound money on the market (Bitcoin).

Regardless of what happens, I am encouraged to see Lagarde and her colleagues not only spending resources, both intellectually and financially, on the potential creation of central bank digital currencies, but I am even more excited to see them publicly talking about it more frequently. Every conversation around digital currencies, whether fully decentralized or otherwise, is an advertisement for Bitcoin. And the ECB has a giant megaphone so let them go out and do some of the hard work for us :)


Today’s newsletter is sponsored by Binance, the world’s leading cryptocurrency exchange with more than $1 billion in daily trading volume. You can now trade from any device (mobile, desktop, or API) and from anywhere (US or internationally). If you’re serious about buying cryptocurrencies, Binance is the #1 place to do it.


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Michael Dunworth is the CEO of Wyre, a company focus on connecting crypto companies to the fiat world. He has been in Silicon Valley for awhile, so this conversation gives great insight into how entrepreneurs in the tech epicenter think about building companies, especially in the crypto industry. We had a lot of fun hanging out and Michael is both entertaining and educational, so you should find this one fun :)

In this conversation, Michael and I discuss:

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I really enjoyed this conversation with Michael. Hopefully you enjoy it too.


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