An executive at the European Central Bank (ECB) is sounding off against digital assets, saying that the nascent asset class is dangerous and offers no benefit to society.
Speaking at a panel about the future of crypto assets during the 22nd Bank for International Settlements Annual Conference, Fabio Panetta, a member of the ECB’s executive board, says he considers trading digital assets as a form of gambling.
According to Panetta, lawmakers shouldn’t be supporting the crypto industry. Rather, they should be heavily scrutinizing it and creating rigorous regulatory standards.
“Today I will contend that due to their limitations, cryptos have not developed into a form of finance that is innovative and robust, but have instead morphed into one that is deleterious. The crypto ecosystem is riddled with market failures and negative externalities, and it is bound to experience further market disruptions unless proper regulatory safeguards are put in place.
Policymakers should be wary of supporting an industry that has so far produced no societal benefits and is increasingly trying to integrate into the traditional financial system, both to acquire legitimacy as part of that system and to piggyback on it. Instead, regulators should subject cryptos to rigorous regulatory standards, address their social cost, and treat unsound crypto models for what they truly are: a form of gambling.”
Panetta goes on to list what he believes are the weak points of digital assets, such as the limitations involved when transferring crypto, their lack of intrinsic value, as well as the market’s centralized infrastructure.
The ECB executive concludes that the public sector should support efforts by the state to develop central bank digital currencies (CBDCs).
“[The public sector] should also resist calls to provide state backing for cryptos, which would essentially socialize crypto risks. 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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