Fabio Panetta is an executive member of European Central Bank (ECB), and a vocal advocate of central bank digital currencies (CBDC). He is also skeptic about cryptocurrency. presented On Jan. 5, he made his latest argument in support of the former. Writing on the official ECB blog, he said that by developing CBDCs, central banks “will safeguard the trust on which private forms of money ultimately depend.”
Panetta began his argument by giving a harsh assessment of cryptocurrency in 2022. “Last year marked the unravelling of the crypto market as investors moved from the fear of missing out to the fear of not getting out,” he said.
That observation served as a segue to an examination of the position that cryptocurrency should be left alone to “burn rather than regulate at the risk of legitimizing cryptos.” But this is a strawman that is immediately taken down:
“First, despite their fundamental flaws, it is not certain that crypto assets will ultimately self-combust.”
Second, “the cost to society of an unregulated crypto industry is too high to ignore,” Panetta wrote, especially for “uninformed investors.” He went on to mention money laundering and environmental harm, and quipped, in the style that characterized the blog post:
“It is not just cryptos that are being burnt.”
Having established the necessity of regulation, Panetta suggested that the European Union’s Markets in Crypto Assets (MiCA) legislation was an important step, but insufficient in regard to crypto asset lending or non-custodial wallet services. In addition, “unbacked cryptos […] should be taxed in accordance with the costs they impose on society,” Panetta said. His solution:
“Trading in unbacked digital assets should be treated by regulators like gambling.”
That treatment would include both taxation and measures to protect “vulnerable consumers.”
It is amazing to see the ECB engaging in public discussions on the subject of #crypto & #Bitcoin. It is probably more than any other central bank anywhere in the world. https://t.co/QCcoFqNJaP
— Patrick Hansen (@paddi_hansen) January 5, 2023
Panetta stated that crypto will be subject to regulation and taxation, but not without its flaws. Only CBDC “a risk-free and dependable digital settlement asset,” and by preserving the role of the central bank, trust in cryptocurrency will be safeguarded, he concluded.
Official: ECB should offer DLT wholesale settlements to the market when it is needed
The ECB blog caught the eye of the crypto community on Nov. 30 with an entry titled “Bitcoin’s Last Stand.” Panetta has previously proposed banning crypto assets that have significant environmental impact.