ECB executive calls for ban on energy-intensive crypto-currencies

Fabio Panetta, a member of the European Central Bank (ECB) executive board, has called for a ban on crypto-assets with a major environmental impact to mitigate risks.

ECB could ban crypto-assets with environmental impact

In a written statement to the London Business School’s Insight Summit on December 7, Fabio Panetta called for harmonized taxation of crypto-currencies to help address the energy and environmental cost of mining and validation. Referring to proof-of-work assets, he proposed that crypto-currencies that are “deemed to have an excessive environmental footprint” be banned. Fabio Panetta noted that crypto-currency markets are constantly at risk due to their interconnected nature and high leverage. Commenting on the FTX liquidity crisis and subsequent collapse, he stated:

“Inadequate governance of crypto companies amplified these structural flaws. Insufficient transparency and disclosure, lack of investor protection, and weak accounting and risk management systems were glaringly exposed by the FTX implosion. As a result of this event, crypto-assets may shift from centralized to decentralized exchanges, creating new risks due to the lack of a central governance body.”

MiCA could mandate environmental impact reporting for miners

Fabio Panetta’s remarks come after the European Parliament’s Committee on Economic and Monetary Affairs approved the Crypto-Asset Markets (MiCA) bill in October after extensive discussions.

The environmental impact of crypto-currency trading and mining has been a major talking point in discussions around regulation among policymakers around the world. Earlier this year, the New York Senate passed a bill banning proof-of-work (PoW) mining that uses non-renewable energy for two years in an effort to mitigate the environmental impact of the activity. European Union officials have previously rejected a complete ban on crypto-currency mining, but it is expected that the new MiCA bill may require crypto-currency mining companies to report any potential environmental impacts related to their activities.

The ECB is currently exploring the possibility of launching a central bank digital currency. On December 7, Fabio Panetta provided guidelines for the development of apps and wallets using the digital euro. These guidelines were provided to the five companies selected for this purpose following a public call for expressions of interest launched in April this year. The documents provide the necessary information for the development of front-end prototypes corresponding to the Eurosystem’s back-end infrastructure without hindering the developers’ scope for innovation.