Fabio Panetta, a member of the executive board of the European Central Bank (ECB), suggests a dark future for cryptocurrencies, where digital assets can be used for more than gambling by investors.
In written remarks for a panel at the Bank for International Settlements Annual Conference on June 23, Panetta said that investors’ view of crypto as a “strong store of value” has begun to fade of late. in 2021 and into 2022, when the total market capitalization falls more. than $1 trillion. According to the ECB official, the “highly volatile” nature of crypto assets makes them suitable for gambling, and should be treated as such by global regulators.
“Because of their limitations, cryptos have not become a form of finance that is innovative and stable, but instead has become a destructive one,” Panetta said. “The crypto ecosystem is riddled with market failures and negative externalities, and it is bound to experience further market disruptions unless appropriate regulatory safeguards are put in place.”
He added:
“Policy makers should be careful to support an industry that has so far not had any social benefits and is increasingly trying to integrate with the traditional financial system, to gain legitimacy as part of that system and the piggybacking on it.”
Crypto relies on constantly creating new accounts to attract new investors, but fails to deliver on its promises. Policy makers should be wary of supporting an industry that so far has no benefits for society.
Read the speech https://t.co/okum8fH3qf
1/3 pic.twitter.com/40OlefVExB
— European Central Bank (@ecb) June 23, 2023
Panetta admitted that the “security, scalability and decentralization” of crypto transactions are “unattainable”, citing the immutability of blockchains as a negative aspect of the space due to transactions. which is often irreversible. He cited the collapse of FTX as well as a recent lawsuit brought by the United States Securities and Exchange Commission against Binance as “fundamental deficiencies” in the ecosystem.
Related: CZ addresses the reasons behind the recent FUD on Binance
“It is good for crypto enthusiasts to remember that new technology does not eliminate financial risk,” the ECB official said. “It’s like pressing a balloon on one side: it changes shape until it bursts on the other side. And if the balloon is full of hot air, it may rise for a while but eventually explode.
Panetta has previously backed parts of the ECB’s plans for a potential digital euro, which the central bank is currently reviewing. He also proposed banning crypto assets with “excessive ecological footprints” as part of efforts to address environmental risks.
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