As part of measures to mitigate risks, Fabio Panetta, a member of the European Central Bank’s executive board, suggested outlawing crypto assets with a substantial impact on the environment.
The taxation of cryptocurrencies across international jurisdictions could solve some of the energy and environmental costs associated with mining and validation, according to Panetta’s written remarks for the Insight Summit at the London Business School on December 7. Tokens that “are deemed to have an excessive ecological footprint should also be banned,” he continued, citing proof-of-work assets.
He continued by saying that the weak governance of crypto businesses has made such structural issues worse. The collapse of FTX showed serious flaws in accounting procedures, risk management, investor protection, and insufficient transparency and disclosure. Crypto assets may switch from centralized to decentralized exchanges after the FTX incident, posing new concerns due to the lack of a centralized governance body.
Following lengthy deliberations, the European Parliament’s Committee on Economic and Monetary Affairs approved the Markets in Crypto Assets bill in October, prompting the ECB official to urge for further regulatory monitoring of the “Wild West” cryptocurrency industry.
The Markets in Crypto Assets bill is still being examined by the legal and language committees of the EU parliament before it is formally adopted. Following trilateral talks between the EU Council, European Commission, and European Parliament, the MiCA framework was approved by the economics committee of the European Parliament in October. Many believe the policy will begin to take effect in 2024.
Recently, Mairead McGuinness, the European Commissioner for Financial Stability, Financial Services and the Capital Markets Union said in an interview that those who are against regulation of the crypto sector are on a “dangerous path.” She also claimed that Europe and the US are working on a coordinated strategy to regulate the crypto sector.
In light of the collapse of crypto exchange FTX, ECB president Christine Lagarde called for “MiCA II”—an addition to the legislation that was created for the original Markets in Crypto Assets bill. It wasn’t the first time the ECB president called for the bill. She said in June that the bill “should control the activities of crypto-asset staking and lending, which are undoubtedly rising.” Which basically regulates the DeFi sector.