Bitcoin Still Terrifies Central Bankers

While the European Central Bank remains harsh towards bitcoin, the Russian one is not lagging behind. Its president, Elvira Nabioullina, proposes to “reserve it for the wealthiest individuals,”

The president of the Russian central bank has been met with amusement for trying to put limits on bitcoin.

Elvira Nabioullina proposes to “reserve it for the wealthiest individuals,” in a context where the gap between the EU and the United States regarding bitcoin is widening.

This is reported by the Moscow Times about the international payments that the Russian central bank is making in bitcoins to circumvent the Western financial embargo. Bitcoin is proving to be a very valuable ally while waiting for international tensions to ease.

These BTC payments are open to banks, insurance companies, and investment funds. However, individuals need an annual income exceeding 50 million rubles ($580,000) to benefit from it.

Of course, this restriction only concerns this “experimental system” hijacked by the central bank. Buying bitcoins is absolutely not prohibited in Russia. That said, businesses are not allowed to accept it as payment.

Like Christine Lagarde, for whom bitcoin is “a way out,” Elvira Nabioullina prefers the CBDC. It has existed since last year, but nobody is using it.

This distrust contrasts with the opinion of Vladimir Putin, who stated a few months ago:

“Who can ban bitcoin? No one. Whatever happens to the dollar, these new technologies will develop in one way or another.”

What’s the Point of Banning BTC Payments?

Is it to preserve the margins of payment companies like Visa, Mastercard, or MIR (Russia)? Probably not, since bitcoin is far from competitive: 6 dollars on average per transaction in 2024.

Visa and Mastercard, for their part, take 0.3% on each card transaction (it’s much more outside of Europe and the United States). Their payments are therefore much cheaper in the overwhelming majority of cases.

Of course, it is possible to use the Lightning Network (LN). Fees are 0.02% on average for transactions valued between 100 and 1000 euros. It’s 0.24% for transactions between 1 and 10 euros.

Unfortunately, we would have difficulty using the Lightning Network simultaneously. The reason being that depositing bitcoins into your LN wallet requires first completing an “on-chain” transaction.

In other words, it would take 50 years for each human to make a single transaction… Transaction fees would explode with every enthusiasm for the LN, preventing any lasting enthusiasm.

So there is not much to fear. Bitcoin can only remain a marginal payment currency due to the limit of 1 MB per block, which is at the heart of its decentralization.

Moreover, bitcoin cannot replace banks. For that to happen, governments would first have to agree to abandon their money printing presses. Unlikely, but let’s assume that’s the case.

Can Bitcoin Replace the Fiat System?

Let’s imagine bitcoin is the one and only currency on earth. Let’s engage in a thought experiment by asking how to finance the six EPRs for which the bill is estimated at 70 billion euros.

Under normal circumstances, EDF would go to borrow from BNP Paribas, which would create these billions ex nihilo. These billions would then be destroyed as EDF repays them (except for interest, of course). That is the functioning of the “fiat system”.

But how to do that if the amount of money in circulation is fixed? How to find the equivalent of 70 billion in BTC? It would literally require persuading 7 million French people to each lend the equivalent of 10,000 euros for 15 years.

The scaling-up seems very difficult. Creating money ex nihilo appears essential for any complex society.

Not to mention the energy resources. Standard of living = Productivity = machines = energy (and especially oil). Without the abundant and inexpensive energy that productivity requires, wages cannot keep up with inflation exacerbated by the overflowing debts of governments.

All this to say that central bankers have nothing to fear from bitcoin. Its low transaction throughput and fixed money supply prevent it from replacing payment companies and banks. Its superiority lies elsewhere.

Above all, bitcoin allows one to protect against inflation, which disproportionately affects those who cannot afford rare assets like premium real estate.

Conversely, anyone can appropriate the best store of value in the history of humanity (bitcoin). It doesn’t matter whether you have a million euros, 10,000 euros, 1,000 euros, or 100 euros in savings.

Bitcoin is poised to become the universal reserve currency. And that’s already a lot! Don’t miss our article: Bitcoin – Soon a Russian strategic reserve?