World needs crypto regulation – ECB official

3 May, 2022 12:59 / Updated 3 years ago
Crypto assets should be used within clear, regulated boundaries, Fabio Panetta says

Globally coordinated measures are needed to regulate the crypto market and avoid a “lawless frenzy of risk-taking,” top official at the European Central Bank Fabio Panetta said in a speech at Columbia University on Monday.

Now is the time to ensure that crypto assets are only used within clear, regulated boundaries. We should make faster progress if we want to ensure that crypto assets do not trigger a lawless frenzy of risk-taking… But our measures can only be effective if they are matched by ambitious measures implemented by our international peers,” Panetta stated.

According to Panetta, an unregulated crypto market poses financial stability risks, and policymakers should not leave the situation to chance.

We need globally coordinated regulatory action to address issues such as the use of crypto assets in cross-border illicit activities or their environmental footprint…

In the absence of adequate controls, crypto assets are driving speculation by promising fast and high returns and exploiting regulatory loopholes that leave investors without protection,” the official added, drawing a comparison between cryptocurrencies in their largely unregulated state and the US mortgage market that led to the 2008 global financial crisis.

Panetta said crypto should be regulated with the same set of rules as other financial assets, such as anti-money laundering mechanisms and terrorism-financing prevention. He also noted that while they remain unregulated, crypto assets could be easily used to circumvent sanctions or evade taxes.

The official claimed that if the market could ensure the disclosure and transparency of transactions, consumers would have greater protection from economic risks in the crypto market and that would ultimately lead to greater consumer protection. Panetta also pitched an idea to increase taxation for some crypto assets but did not elaborate further.

Panetta’s statements come days after the International Monetary Fund (IMF) published its Financial Stability Report. In the document, the financial body called on policymakers to develop global standards for crypto assets and to coordinate their regulatory approach.

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