‘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

article-image

European Central Bank’s Fabio Panetta | Source: European Central Bank/"ECB Forum on Central Banking 2020" (CC license)

share

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.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

recent research

Unlocked by Template (2).jpg

Research

Vertex has established itself as a formidable player in the perps DEX landscape. Its strategic approach to chain expansion, focusing on EVM-compatible networks and leveraging incentive programs, has proven largely successful. The reduced time-to-launch for each new chain integration highlights the team's growing expertise and the scalability of their technology. As Vertex continues to expand, it is well-positioned to capitalize on the increasing fragmentation of the perpetual DEX market, potentially consolidating liquidity across multiple chains through its Edge technology.

article-image

Plus, the latest entrant into the crypto fund game

article-image

The goal of Tuesday’s inaugural Congressional hearing on DeFi was to “explore emerging topics” in digital assets, Rep. French Hill said

article-image

Blockworks Research analyst predicts 2025 will be a big year for economic changes on Solana

article-image

A tech industry coalition executive last week urged moderators to ask about crypto, noting that “passing bipartisan digital asset regulations is front and center this election cycle”

article-image

BitGo’s using a 1-2-of-3 decentralized verifier network involving LayerZero Labs and Polyhedra

article-image

The challenge of securing our digital world lies in developing conflict-resistant digital infrastructure