Following the crypto sector crash of 2022, a European Central Bank (ECB) executive board member has called for increased oversight of the sector
In particular, the executive, Fabio Panetta, stated that cryptocurrency investment could be equated to gambling, noting that digital assets are not economically useful, he said in a blog post on January 5.
He suggested that following the recent price movement, digital assets, due to their unbacked background, carry a ‘speculative nature’ due to fluctuating value and should be treated as ‘gambling activities.’
“They do not perform any socially or economically useful function. <…> They are rarely used for payments and do not fund consumption or investment. As a form of investment, unbacked cryptos lack any intrinsic value, too. They are speculative assets,” he said.
Borrowing from gambling laws
Furthermore, Panetta stated that in enacting regulations, the agency should focus more on borrowing a leaf from the existing gambling laws. At the same time, he put emphasis on identifying means digital assets can be used for other vices such as money laundering, terrorist financing, and the circumvention of sanctions.
“Vulnerable consumers should be protected through principles similar to those recommended by the European Commission for online gambling. <…> They should be taxed in accordance with the costs they impose on society,” he added.
It is worth noting that the growth in popularity of crypto assets has resulted in calls for regulation over concerns the effects might impact the broader financial system. In this case, due to minimal impact on the financial system, there have been calls to let the sector ‘burn out.’
However, Panetta suggested that leaving the sector to ‘self-combust’ might not be an option citing the crypto industry’s associated risks.
The push CBDCs
The executive board member further called for the need to implement central bank digital currencies (CBDC) to counter the influence and impact of private digital assets. Notably, the ECB is among the central banks globally in the advanced stages of researching a possible CBDC.
It is also worth mentioning that Europe is also among the global jurisdictions advancing the discussion on crypto regulation. In this line, the region is working towards rolling out the Markets in Crypto Assets (MiCA) legislation.