‘Lawless’ Crypto Industry Needs Harsh Regulation, European Central Bank Exec Says
As the ECB does due diligence on a possible CBDC, executives issue warnings about other digital assets
European Central Bank’s Fabio Panetta | Source: European Central Bank/"ECB Forum on Central Banking 2020" (CC license)
key takeaways
- European Central Bank officials are concerned about crypto’s volatility
- Many protocols make empty promises to investors in a similar way to a “Ponzi scheme,” Fabio Panetta said
A European Central Bank (ECB) board member has taken a tough stance against digital assets, dubbing the business of blockchain a “lawless frenzy.”
Fabio Panetta, who has served on the ECB board since 2020, called for greater regulation of the emerging asset class to protect investors from the “Ponzi scheme” of cryptocurrencies.
“Crypto evangelists promise heaven on earth, using an illusory narrative of ever-rising cryptoasset prices to maintain inflows and thus the momentum fueling the crypto bubble,” Panetta said during a speech at Columbia University in New York Monday. “But appearances are deceptive. Satoshi Nakamoto’s dream of creating trustworthy money remains just that: a dream.”
The industry today bears a “striking” resemblance to the subprime mortgage crisis of 2008 that triggered the largest US economic downturn since the Great Depression, Panetta said.
Additional ECB officials, meanwhile, have voiced concerns over the pace of the industry’s growth. The European Union, like the US, is still in the early days of regulating digital assets.
ECB Vice President Luis de Guindos said while the asset class’ volatility has not yet had an impact on financial stability, it is a risky industry that regulators need to watch.
“At this pace of growth, we have to pay attention to it — especially in relation to issues such as terrorism financing and tax evasion,” he said in November.
Isabel Schnabel, another board member, has previously called bitcoin “speculative,” adding its high volatility makes it “unsuitable as a store of value.”
Amid the call for greater oversight, the ECB has been investigating the use case for a central bank digital currency, Panetta told the European Parliament in March.
A government-issued electronic currency could revolutionize the payments systems, but there are concerns about privacy and security.
“Issuing a central bank digital currency would help to maintain the autonomy of domestic payment systems and the international use of a currency in a digital world,” the ECB wrote in a June report.
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