Fabio Panetta of the European Central Bank described cryptocurrencies as a “Ponzi scheme” and explained that they are harmful to society. It proposes stricter regulatory and fiscal standards at a global level.

The executive of the European Central Bank, Fabio Panetta, called this Monday for a robust global regulation standard to apply to digital currencies to avoid these assets’ potential risks.

In a speech made at Columbia University, Panetta discussed that digital assets are creating a new Wild West that might result in harm to society. He also called them a greed-driven Ponzi strategy. The ECB website released the statements, which got picked up by many media outlets, including CoinDesk and The Block.

The official said that cryptocurrencies are speculative items that can significantly damage society. They derive their value primarily from greed, relying on the desire of others and expecting that the scheme will continue unrestrained.

Cryptocurrencies Need More Supervision

The member expressed concerns about the sudden growth of the sector to justify stronger regulations later. This strong appeal of crypto assets, especially those without support, is a cause for concern given the lack of fundamentals, the increasing rate of scandals, their use in illegal operations, and the high volatility.

Panetta also compared digital assets, whose capitalization currently surpasses $1 trillion, to the subprime mortgages that generated the 2008 financial crisis. He said that both work with almost the same dynamics.

Panetta said in his speech that they must not repeat the same mistakes, which quoted Littlefinger, a character from the famous tv show Game of Thrones, who sustained that chaos is a ladder.

The representative also stated that now is the moment to ensure that cryptocurrencies are only a valuable tool within transparent and regulated limits and for purposes that enrich every sector in society, to prevent chaos through illegal activities.

According to Panetta, regulation grants enough compliance with anti-money laundering and terrorist financing regulations within the digital industry. He also urged that solid and transparent requirements and proper norms of conduct should strengthen the sector.

Higher Taxes for PoW

The energy consumption of Bitcoin and proof-of-work (PoW) cryptocurrencies, a topic that has been at the center of discussions from regulators around the world, did not go unnoticed in Panetta’s speech. The official cited energy and environmental concerns about PoW crypto mining.

Panetta also proposed that digital assets focused on PoW should get taxed at a higher global rate than other financial tools focused on negative behavior that lead to compromise costs such as increased pollution.

AML Rules Must Apply

As CoinDesk and The Block highlight, Panetta was a great defender of the issuance of the digital euro while encouraging the advancement of MiCA, the broad regulatory framework for digital assets of the European Union that intends to unify the standards for companies between the bloc nations.

Although Panetta desires to push these actions further, he has called for anti-money laundering (AML) regulations to extend to the crypto environment, including peer-to-peer payments.

By: Jenson Nuñez

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