Bitcoin is under fire from every angle. The UK’s financial regulator, the Financial Conduct Authority (FCA). Europe’s central bank, the European Central Bank (ECB). The financial media. The banks. Everyone is criticising the cryptocurrency.

The thing is, that’s what it was built for. To offer a currency independent of “the powers that be”. So, will bitcoin hold up under fire, proving its value? Or will it be torn down by the establishment?

That’s the question we begin to tackle today.

Let’s start with ECB president Christine Lagarde’s criticism:

“For those who had assumed that it might turn into a currency – terribly sorry, but this is an asset and it’s a highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money-laundering activity,” Lagarde told Reuters’ online summit.

This is an important analysis from an expert in the field. Lagarde is, after all, the creator of copious amounts of “funny money” out of thin air, using what would be deemed counterfeiting if any of us did it. And she was herself convicted for her role in a €400 million payment to a businessman friend of former French President Nicolas Sarkozy.

In the end, she wasn’t fined the €13,000 amount threatened for the €400 million payment… but that just adds to how reprehensible and funny the “funny business” was. So, when Lagarde discusses bitcoin, we should sit up and listen. She would know.

The FCA echoed our own warnings about the just how risky bitcoin is:

Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money.

Well said. That’s why you shouldn’t invest more than you can afford to lose. As is the case with some stocks and bonds, of course.

But don’t forget that risk and return are related. The higher the returns you’re hoping for, the higher the risks you take. It’s risk management that’s the key. And there’s far more to it than “be prepared to lose all your money”. More about that in coming days.

The financial services industry has responded to the criticism of bitcoin. A Sunday Times report claims that several UK banks are no longer processing certain transactions to cryptocurrency exchanges.

But it’s not just the banks, as many of you have emailed in about. Brokers and financial markets are making crypto-related investments difficult too.

Our cryptocurrency expert Sam Volkering had this to say in his cryptocurrency-focused publication:

As of today, there’s a ban on the sale, marketing and distribution to all retail consumers of any derivative and exchange-traded notes (ETNs) that reference unregulated transferable crypto assets.

In short, a ban on crypto derivatives – NOT a ban on the direct underlying crypto asset.

The misunderstanding about this has caused some concern amongst a number of people. Notably because a lot of UK-based brokers had been offering investment products such as the XBT Bitcoin Tracker – an exchange-traded product (ETP) that tracks the price of bitcoin. There is also an XBT Ethereum tracker which does the same thing with the price of Ethereum.

These kinds of products can no longer be offered here in the UK. If you managed to have them in your broker accounts, you can keep them, sell them, you just can’t buy them any more.

These kinds of products do NOT own the crypto directly. They are synthetic products used to track the price in fiat money.

If you want to go and buy yourself some bitcoin or Ethereum, as you’re well aware, you just go and buy it directly. You can continue to do this, there is no ban on the purchasing of direct crypto assets.

Some think this ban may be the first step in the banning of crypto directly as well. You never know what the regulators will do, but I am not expecting anything like that in the near future. Or at all really.

To ban crypto assets, would be equivalent to banning small and microcap stocks – the risk, volatility and understanding isn’t all that dissimilar, and I can’t see the FCA banning those.

Hence, while this FCA ban is in my view, ridiculous, I can also see there does need to be a better understanding of derivates by investors – however, there needs to be a better understanding of derivatives by investors across all assets not just crypto.

Hence if the FCA does it to crypto, it should do it to “traditional” assets too – which it hasn’t. Hence I also believe this ban won’t be forever. I think we will see far more regulatory compliant operations offering these kinds of derivative products to investors.

Either way, for me, if you want to track the price of bitcoin or Ethereum, the best way to do it is to get the crypto asset directly. It’s not like it’s hard to do, and frankly it’s more liquid and easier to move in and out of than any ETP run through a broker anyway.

In a nut shell, I think the ban is silly, annoying, but overall doesn’t really impact anything in the wider crypto space.

Investing in cryptocurrencies via financial derivatives is a little odd. The Financial Times explains why:

Bitcoin was built on the belief that no one should trust the financial establishment. Yet the ranks of cryptocurrency enthusiasts increasingly include mainstream investors seeking diversification rather than revolution. Bitcoin funds tap into the frenzy with a semblance of respectability.

But indirect ways of investing are not so respectable now that the FCA has had its say…

We’ll continue to give you our take on all this. As well as that of Sam Volkering – our cryptocurrency expert.

But there’s a common criticism I’ve been hearing a lot lately which I’d like to address today.

Critics argue that bitcoin has no intrinsic value

Therefore, it will eventually go to zero.

Now nobody ever really explains what they mean by intrinsic value. Otherwise, they’d realise that the same goes for a lot of other assets. Including our banknotes and digital money.

But our money is valuable for a simple reason. It keeps you out of prison. Because you have to pay taxes in the money designated by government.

So, what makes bitcoin valuable?

Well, it isn’t the speculative performance. Bitcoin is no investment, if you ask me. It is a currency. Whose value I expect to rise dramatically. But that’s not the point of value.

Bitcoin’s value comes from a similar place to our regular money’s value. I’m not sure whether you can label this “intrinsic” value specifically, but it’s value nonetheless.

And that value is simple. Bitcoin offers you the ability to transact. Internationally, at very low cost, quickly, independent of banks and government, securely, anonymously, with a limited money supply, and plenty of other features. All of which can be debated, but that’s the promise at least.

This capability has value. A lot of value. Especially in a world where money is being printed like mad, the US government controls the financial system, the internet is almost ubiquitous, and so on and so forth.

Bitcoin is useful. Hence it has value.

With that bugaboo out of the way, let’s move on to another question a reader sent in. It’s an excellent one which I hadn’t thought of:

If I’ve understood correctly, [your article] states that it is the bitcoin miners who verify and modify the blockchain when a transaction takes place.

Please can you tell me what happens when all 21 million bitcoin have been mined – as there will then be no miners?


Our cryptocurrency expert Sam Volkering responded when I forwarded the question:

In confirming and adding blocks to the blockchain, the miners receive (currently) the block reward, but also all transaction fees with each block. The design of the network is that by the time the block reward is exhausted (which isn’t expected until around the year 2140) the miners rewards in block fees will sufficiently be their economic incentive to continue to mine.

With scale, and increasing transaction value on the network, this incentive should more than compensate miners for their time/energy cost. Also, with reductions in energy cost over time, with things like renewable energy, their cost to mine and economic reward continue to mean it is a profitable exercise.

Also bear in mind by that stage as well, the intention is that you won’t even necessarily relate bitcoin into fiat money – hence the transaction fee reward in BTC again will be more than sufficient as an economic incentive.



It’s a good example of how cryptocurrencies can be designed in a myriad of ways, with varying features. Bitcoin is just one example.

May the best cryptocurrency win.

Nick Hubble
Editor, Fortune & Freedom