A director of the European Central Bank (ECB) is protesting digital assets, saying the nascent asset class is dangerous and offers no benefit to society.
During a panel discussion on the future of crypto assets at the 22nd annual conference of the Bank for International Settlements, Fabio Panetta, a member of the ECB’s Governing Council, says he considers trading digital assets a form of gambling .
According to Panetta, lawmakers should not support the crypto industry. On the contrary, they should investigate it thoroughly and set strict regulatory standards.
“Today I will argue that because of their limitations, cryptos have not evolved into a form of finance that is innovative and robust, but instead have morphed into one that is harmful. The crypto ecosystem is riddled with market failures and negative externalities, and it is bound to experience further market disruptions unless proper legal safeguards are put in place.
Policymakers should be wary of supporting an industry that has so far failed to deliver social benefits and is increasingly trying to integrate into the traditional financial system, both to gain legitimacy as part of that system and to piggyback on it. Instead, regulators should subject cryptos to rigorous regulatory standards, address their social costs, and treat flawed crypto models for what they really are: a form of gambling.”
Panetta then lists what he believes are the weaknesses of digital assets, such as the limitations in transferring crypto, their lack of intrinsic value, as well as the market’s centralized infrastructure.
The Executive Board of the ECB concludes that the public sector should support the state’s efforts to develop central bank digital currencies (CBDCs).
“[The public sector] should also resist calls to provide state support for cryptos, which would essentially socialize crypto risk. The public sector should instead focus its efforts on contributing to the development of reliable digital settlement assets, including through their work on central bank digital currencies.”
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Featured image: Shutterstock/Philipp Tur
