A senior European Central Bank official labelled the current cryptocurrency structure as a Ponzi scheme fueled by greed. Fabio Panetta, an executive board member of the European Central Bank, called for the clampdown on the lawless frenzy involved in Crypto Trading. There are ECB officials who are on record criticizing the crypto industry. However, Fabio Penatta’s recent comments emphasize the escalation of the Central Bank campaign against digital assets, including Bitcoin and Ether. The $1.8 billion industry continues to expand with increased interest from mainstream investors and media. He insisted the need for new global standards to regulate digital assets and avoid lawless risk-taking in its trade.
ECB Official Urge on Regulation of Crypto
As an executive board member of the European Central Bank, Fabio Panetta is responsible for oversight of the ECB’s work on the digital Euro. In Fabio’s appeal to regulators, he highlighted an urgent need for coordinated efforts worldwide. Lawmakers should formulate regulations based on the potential risks of the cryptocurrency industry.
He was providing a speech on a written statement at Colombia University. He commended the progress made so far by global policymakers. However, he underlines that these regulations are minimal and the regulatory frameworks were not swift enough to keep pace with emerging challenges. The European Central Bank has limited authority to clamp down on the crypto industry market. Its only influence on the market is its supervisory role of major Eurozone banks and overseeing financial stability in the region.
The ECB Senior official urges the need for crypto regulations to focus on Anti-Money Laundering and Countering the Financing of Terrorism rules of the Financial Action Task Force. The push should emphasize public disclosure on exchanges users and transactions. In addition, the industry should report on regulatory compliance and formulate strict transparency requirements. It includes standards of conduct for the crypto industry.
Concerns highlighted by the ECB Senior Official
The primary concern of Fabio Panetta is the dealings of the Central bank and policymakers on the taxation of cryptocurrency and other digital assets. Panetta’s view is that the current taxation requirements are at its minimal. There is a challenge in identifying activities that are relevant to taxation in the crypto industry. He proposes additional tax on cryptocurrency assets via proof of work basis at an increased rate than all other financial instruments due to the negative externalities. These externalities lead to sunk costs. These digital assets are speculative assets with the potential to cause significant damage to society. Panetta mentions that they are harmful without social or economic value, especially with their high energy consumption.
According to Panetta, cryptocurrencies derive their value from greed. The digital assets rely on the greed of other members of society with the hope that the scheme continues unrestrained. The industry is severally referred to as the House of Cards. Panetta insists that the House of Cards, if left unhindered, will collapse and several investors will incur significant losses. These digital assets may only comprise one percent of the entire global assets. Despite this, they are larger than the infamous market for the United States subprime mortgages in 2008. These mortgages are infamous due to their contribution to the financial crisis of 2008. Panetta urges that we ought to learn from previous mistakes in the financial market by waiting for this bubble to burst. His warning is anchored on the involvement of high net worth investors, family offices, and financial advisors. These parties have taken the lead in the charge of investing in crypto.
The ECB Senior official likened the current industry to a Ponzi scheme where its dynamics continue to thrive with an increase in the number of investors. These investors have high expectations of the trend set of increased prices of crypto assets. His concern is that fiat values are unreliable with any guarantee or flow of revenue until the bubble bursts and the frenzy towards the industry vanishes. There is limited capital gains tax on crypto assets with most users evading taxes through the industry. It is why he reiterates higher tax on crypto beyond other financial instruments.
A case example he uses is the price volatility of Bitcoin. Crypto Lists confirm that the Bitcoin price is hovering around the $40,000 markdown from its $6 9000 achievement in November 2021. It showcases crypto’s inability to store value and be a means of payment. Furthermore, billions of dollars of transactions are associated with criminal activities. This comes after the increased sanctions facing Russia over the war in Ukraine. Panetta insists that Europe’s regulatory measures require to go beyond the implementation of markets in crypto assets legislation that the EU is finalizing.