Crypto assets should be outlawed if they consume too much energy, according to European Central Bank (ECB) board member Fabio Panetta in a speech on Wednesday.
According to him, the FTX crisis would likely drive investors to decentralized exchanges, which will be more difficult to govern and likely to aggravate financial shocks.
Despite the fact that the collapse of the crypto exchange FTX exposed flaws in accounting and risk management, Panetta believes crypto will continue to attract investors looking to gamble, a risky activity he wants to keep separate from traditional finance.
“On the whole, it is difficult to see a justification for the existence of unbacked crypto-assets in the financial landscape. Their combined features mean that they are just speculative assets. Investors buy them with the sole objective of selling them on at a higher price. In fact, they are a gamble disguised as an investment asset,” he said.
Panetta also points to doubts about the “stability of stablecoins”:
“The second flaw is the purported stability of stablecoins, which the entire crypto ecosystem has structural based on to underpin trading in crypto-assets and liquidity provision in DeFi markets.”
He suggested that references to platforms such as Bitcoin, which use an energy-intensive mechanism known as proof-of-work to validate transactions and secure their network, be prohibited.
“Such a tax could, for example, address the high energy and environmental costs associated with some crypto-mining and validation activities. This would be in line with the current EU priorities to address climate change and ensure energy security. Crypto-assets deemed to have an excessive ecological footprint should also be banned.”
Panetta said in statements that reflect previous accusations that the unregulated industry is a “Ponzi scheme” and a “Wild West” that investors have been trapped in the textbook definition of a bubble, attracted by the promise of ever-rising prices.
Panetta is exploring whether the central bank could create its own digital currency. Earlier this week, he laid out some of the requirements for applications and wallets that use the digital euro.
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