According to Fabio Panetta, an European Central Bank (ECB) board member, any crypto asset that is energy-intensive and impacts negatively on the environment should be banned.
Panetta made this suggestion at the Insight Summit held at the London Business School as a way of addressing potential risks. In the written remark, Panetta mentioned his earlier criticism of the crypto industry.
Panetta believes that creating harmony around the taxation of cryptocurrency in different jurisdictions would tackle some of the problems of energy and environmental costs derived from mining and validation. Therefore, tokens “deemed to have an excessive ecological footprint should also be banned.” The categorization has Bitcoin (BTC) written all over it.
Notably, the BTC blockchain makes use of an energy-intensive consensus mechanism known as Proof-of-work (PoW). With PoW, the blockchain is able to validate transactions, secure its network and add more blocks.
European Union Wants Robust Crypto Regulation
He once likened the industry to a Ponzi scheme and a ‘Wild West’. Panetta explained that the crypto industry keeps attracting investors who are more interested in gambling due to a lack of regulation. Therefore, he calls for a more regulatory framework that closely follows the approval of the Markets in Crypto Assets bill (MiCA) by the European Parliament.
More often than not, the crypto industry is in dire need of a standardized rule, according to Panetta the industry level of risk heightened recently due to “incredibly high leverage and interconnections.” He made this insinuation while citing the implosion of the FTX exchange:
“The inadequate governance of crypto firms has magnified these structural flaws. Insufficient transparency and disclosure, the lack of investor protection, and weak accounting systems and risk management were blatantly exposed by the implosion of FTX. Following this event, crypto-assets may move away from centralised to decentralised exchanges, creating new risks owing to the absence of a central governance body.”
Similarly, the president of the ECB Christine Lagarde announced the need for a more robust crypto regulatory framework following the implosion of FTX. She called it an “absolute necessity” especially now that the “stability and reliability” of crypto “has been exposed in the most obvious way recently.”