Fabio Panetta, who is on the executive committee of the European Central Bank (ECB), believes that unbacked crypto-currency assets are gambling vehicles with no intrinsic value, which should be regulated. In an opinion piece, Panetta states that while regulation of crypto-currencies is a good answer to the problem, it must also affect decentralized financial structures.
ECB executive Fabio Panetta believes that crypto-currencies should be subject to regulation similar to gambling.
The question of how crypto-currencies should be regulated and how it should be enforced continues to be a key issue for regulators around the world. Fabio Panetta, a member of the European Central Bank (ECB) executive committee, believes that crypto-currencies, posing as investment assets, are more akin to gambling vehicles. In an opinion piece published on FT.com on January 4, Fabio Panetta argues that unbacked crypto-currencies should be regulated more like gambling instruments than currencies.
About crypto, he stated:
These are speculative assets. Investors buy them for the sole purpose of selling them at a higher price. In effect, it is a gamble disguised as an investment asset.
As gambling assets, they are unlikely to cease to exist if left alone, says Fabio Panetta, even if they have no “intrinsic value“and are rarely used as a means of payment.
Oversight of decentralized finance is needed
The series of negative incidents in 2022, including the demise of the Terra ecosystem and the bankruptcy of one of the largest crypto-currency exchanges, FTX, partly explains Fabio Panetta’s views. For him, the level of interconnectedness that cryptos now see with traditional finance makes it impossible to leave crypto unregulated. Fabio Panetta explains:
We can’t afford not to regulate cryptocurrencies. We need to put safeguards in place to close regulatory loopholes and arbitrage and tackle the significant social costs of cryptocurrencies head on.
This coming regulatory wave, according to Fabio Panetta, must not only treat crypto-currencies as gambling instruments, but also tax them according to the “costs” that they impose on society. Fabio Panetta then tackles decentralized finance, noting the need for regulation in this sector, mentioning crypto asset lending or unguarded wallet services. Finally, Fabio Panetta supports the creation of central bank digital currencies (CBDCs) to overcome the shortcomings of crypto and preserve the role of central banks.
Europe is currently in the final stages of adopting its own regulatory framework for crypto-currencies, called MiCA (Markets in Crypto Assets), and is also considering issuing a digital version of its fiat currency, the digital euro.