A European Central Bank (ECB) board member Fabio Panetta has called for greater regulation in an effort to protect investors from the “Ponzi scheme” of cryptocurrencies. He described the business of blockchain as a “lawless frenzy”.
Panetta highlighted that crypto evangelists promise heaven on earth, using the illusory narrative of ever-rising crypto-asset prices to maintain inflows, fueling the crypto bubble. He said appearances are deceptive. The executive pointed out that Satoshi Nakamoto’s dream of creating a trustworthy currency remains just a dream.
The cryptocurrency industry bears a striking resemblance to the subprime mortgage crisis of 2008, which triggered the largest US economic downturn since the Great Depression.
ECB officials have also voiced concerns over the pace of the industry’s growth. Luis de Guindos, the ECB Vice President, said the asset class volatility hasn’t yet had an impact on financial stability. However, he believes that regulators need to keep a watch as it’s a very risky industry. Guindos said that at the pace the crypto industry is growing, it needs to be tracked very closely, especially when it comes to tax evasion and terrorism financing. Isabel Schnabel, another board member of the ECB, called Bitcoin speculative as its high volatility makes it unsuitable as a store of value.
Furthermore, the ECB has been looking into the use case of a CBDC. Panetta told the European Parliament in March that government-issued digital currency could revolutionize the payments system. But there are also concerns about privacy and security. The central bank acknowledged that issuing a CBDC would help maintain the autonomy of domestic payments systems and the international use of a currency in a digital world.