January 6, 2023 3 min read


The ECB Continues to Push for Crypto Regulation

Fabio Panetta, ECB executive board member, equated cryptocurrency trading to gambling and called for implementing similar regulations

An official blog post on the organization’s website examined the matter in detail, contemplating 2022’s troubled history with cryptocurrency. With waning investor confidence and several high-profile crashes, Panetta argues that strict worldwide regulations are quickly becoming a necessity.

Unbacked Cryptos Have Many Hidden Flaws

The collapse of FTX seems to have heralded the end of cryptocurrency’s golden age as investors scramble to pull out their assets in search of the next big fad. While blockchain technology is here to stay, the incident highlighted crypto’s inherent volatility and a multitude of other risks which can no longer be swept under the table. 

Panetta highlighted some of the intrinsic flaws of unbacked crypto-assets. First and foremost, they offer no benefit to society. Minting them is harmful to the environment, their use in retail remains limited, and they are a favorite tool for tax evasion or criminal activities.

Investment-wise, the situation is not much better. Cryptos lack insurance schemes and remain vulnerable to widespread IT and cyber risks. With no protection schemes, cases like DNP3 gambling away all of his investor’s funds means they will likely receive no compensation. But above all, cryptocurrencies lack any intrinsic value.

Investors buy them with the sole objective of selling them on at a higher price. In fact, they are a gamble disguised as an investment asset.

Fabio Panetta, ECB executive board member

According to Panetta, the many hidden caveats intrinsic to crypto mean that users should not be left to bear the sole responsibility for their purchases. He argues that blockchain-based assets are unlikely to entirely self-combust and will retain their appeal to gambling-minded individuals. So they should be regulated as gambling.

Global Crypto Regulation Is a Growing Necessity

Panetta warns that implementing effective crypto regulations will be an extremely daunting task. He recommends that the industry take an example from established gambling regulators who used to have the funding and backing to keep up with rapid industry and technology developments.

Since unbacked cryptocurrencies are entirely speculative, potential regulations should treat them like gambling and impose similar taxes and customer protection measures. Regulatory efforts require a global reach and adequate safeguards against lobbying efforts to remain effective and hold the industry responsible.

(Unbacked cryptos) should be taxed in accordance with the costs they impose on society.

Fabio Panetta, ECB executive board member

Panetta concludes that while cryptocurrencies will remain popular against less risk-averse investors and regulation may help keep them in line, their many flaws will prevent them from becoming simultaneously trustless and stable. He argues that central banks are necessary to safeguard trust in the monetary system and serve as an anchor for future digital finance ecosystems.

Deyan is an experienced writer, analyst, and seeker of forbidden lore. He has approximate knowledge about many things, which he is always willing to apply when researching and preparing his articles. With a degree in Copy-editing and Proofreading, Deyan is able to ensure that his work writing for GamblingNews is always up to scratch.

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