Fabio Panetta, A member of the Executive Board of the European Central Bank (ECB), he has been a strong supporter of central bank digital currency (CBDC) and a skeptic of cryptocurrencies, presenting his latest argument in favor of a CBDC on January 5. Writing on the ECB’s official blog, he stated that, By developing the CBDC, central banks will “safeguard the trust on which private forms of money ultimately depend.”
Panetta began his argument with a harsh valuation of the cryptocurrency in 2022. “Last year marked the crash of the cryptocurrency market, as investors went from fear of giving in to fear of not getting out,” he claimed.
That observation served as a blade to examine the position that cryptocurrencies should be allowed to “burn instead of regulating them for the risk of legitimizing them”. But it is a straw man who immediately retracts:
“First, despite their fundamental flaws, it is not certain that crypto assets will eventually self-combust.”
Secondly, “the cost to society of an unregulated crypto industry is too high to ignore”, especially for the “uninformed investors”. Panetta went on to mention money laundering and environmental damage, joking, in the style that characterized the blog post:
“Not only cryptocurrencies are burned.”
Once the need for regulation is established, Panetta suggested that the European Union’s legislation on Markets for Crypto Assets (MiCA) was an important step, but insufficient when it comes to crypto asset lending or non-custodial wallet services. Furthermore, “unbacked cryptocurrencies […] should be taxed according to the costs they impose on society,” Panetta said. His solution:
“Unbacked digital asset trading should be treated by regulators like gambling.”
That treatment would include both taxes and measures to protect “vulnerable consumers”.
It’s amazing to see how frequently the ECB is publicly engaging on the topic of #crypto & #Bitcoin. Probably more than any other central bank in the world. https://t.co/QCcoFqNJaP
—Patrick Hansen (@paddi_hansen) January 5, 2023
Even with taxes and regulation, cryptocurrencies will have shortcomings, Panetta argued. Only a CBDC “a risk-free and trustworthy digital settlement asset,” and preserving the role of the central bank, will safeguard trust in cryptocurrency, he concluded.
The ECB post caught the attention of the crypto community on Nov. 30 with a post titled “Bitcoin’s Last Stand”. Panetta has previously proposed banning crypto assets that have a significant environmental impact.
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