The crypto sector crash of 2022 has alarmed regulators across the globe and has invited scrutiny simultaneously too. Recently, an executive board member of the European Central Bank (ECB) has called for increased vigilance in the sector.
On Thursday, Fabio Panetta, an ECB executive, in a blog post, stated that cryptocurrency investment could be equated to gambling, highlighting his opinion that digital assets are not economically useful.
He said that following the recent price movement, digital assets, because of their unbacked background, carry a “speculative nature.” In addition, he suggested that digital assets should be treated like “gambling activities” given their fluctuating value.
Panetta said these assets do not perform any socially or economically useful function and are rarely used for payments. In his opinion, these assets do not fund consumption or investments, and cryptocurrencies also do not have intrinsic value. He said:
“They do not perform any socially or economically useful function. <…> They are rarely used for payments and do not fund consumption or investment. As a form of investment, unbacked cryptos lack any intrinsic value, too. They are speculative assets.”
Further, Panetta said that in enacting regulations, the agency should focus more on borrowing their essence, “a leaf,” from the existing gambling laws. Simultaneously, he emphasized identifying how digital assets can be used for other vices like money laundering, terrorism funding, and the circumvention of sanctions.
According to Panetta, vulnerable investors should be protected via appropriate principles. He talks of the regulation imposed by the ECB on online gambling and also shares his opinions on taxation. In his words:
“Vulnerable consumers should be protected through principles similar to those recommended by the European Commission for online gambling. <…> They should be taxed in accordance with the costs they impose on society.”
Interestingly, the eventual growth in popularity of crypto assets has called on regulatory concerns on the assumption that digital assets might affect the broader financial system. In this case, due to minimal impact on the financial system, there have been calls to let the sector “burn out.”
However, the central bank executive suggested that leaving the crypto sector to “self-combust” might not be an option citing the risks associated with the industry.
Further, he also called for the requirement to implement central bank digital currencies (CBDC) to counter the influence and impact of private digital assets. Notably, the ECB has also been one of those central banks globally in the advanced stages of researching a possible CBDC.
In November, Todayq News reported that a top executive of the ECB emphasized that EU legislators would play a significant role in this field and that she is looking forward to the bill the “European Commission will propose shortly” for establishing the digital euro.
Along with the European Parliament and the Council of the EU, the executive body in Brussels is one of the key players in the intricate legislative process of the European Union. It is in charge of proposing new laws.
The central bank has also expressed that they believe that CBDCs are much better in comparison to Bitcoin and other cryptocurrencies. The bank said that CBDC might be the “holy grail” of technologies that enhance cross-border payments considerably. On the other hand, the monetary authority for the eurozone argued stablecoins, among other alternatives, are “problematic” in recent research.
Currently, Europe is also among the global jurisdictions advancing the discussion on crypto regulation. In this aspect, the region is also working towards executing their Markets in Crypto Assets (MiCA) legislation which as per latest updates is scheduled to not come anytime before February.