Crypto-assets are here to stay, so their regulation is urgently needed to protect investors and the stability of the global financial landscape, European Central Bank board member Fabio Panetta said Wednesday.
Crypto investors have taken a series of blows this year, from the collapse of the FTX exchange to the crash of stablecoin TerraUSD and Bitcoin’s downturn.
“This is not just a bubble bursting. It’s like foam: several bubbles burst one after the other,” Panetta said in a speech in London. “Investors’ fear of missing out seems to have turned into a fear of not getting out.”
Unbacked crypto assets are a form of financial gambling without any socially or economically useful function, so the job is to thwart criminal activity, protect humble investors and save a financial system that could become increasingly intertwined with crypto assets, Panetta said.
Even stablecoins, which are supposed to maintain their value through ties to a pool of assets, are stable in name only, Panetta said.
“But these flaws alone are unlikely to spell the end of cryptos,” Panetta said. “Gambling may be the second oldest profession in the world.”
The ties between the crypto market and the financial system could grow stronger, especially if major tech companies enter the industry, meaning regulation is urgently needed, Panetta said.
Regulatory efforts should primarily focus on preventing the use of crypto assets to circumvent financial regulations and on protecting the mainstream financial system from crypto risks, Panetta said.
(Reporting by Balazs Koranyi; Editing by Barbara Lewis)
subjects
Legislation Europe
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