ECB Executive Advocates Crypto Regulation and CBDC Deployment

An executive board member of the European Central Bank (ECB) Fabio Panetta has published a blog post addressing several issues on cryptocurrencies including regulation and the use of a Central Bank Digital Currency (CBDC). 

Panetta, who is a devoted evangelist of CBDC argued that central banks in various regions will be able to “safeguard the trust on which private forms of money ultimately depend,” with the development of these central digital currencies.

At first, the ECB executive went down memory lane talking about the collapse of the United States dollar-backed stablecoin TerraUSD which happened in May 2022.

He mentioned how the plunge of Do Kwon’s Terra led to the bankruptcy of Celsius Network, Voyager Digital, and Three Arrows Capital (3AC). U.S.-based Bitcoin (BTC) miner Core Scientific which recently filed for Chapter 11 bankruptcy was not left off the list. 

“Last year marked the unravelling of the crypto market as investors moved from the fear of missing out to the fear of not getting out.” Speaking of the volume of tragedies that befell the crypto ecosystem, Panetta added “These failures occurred in rapid succession, reflecting crypto players’ incredibly high leverage, their interconnectedness across the crypto ecosystem and their inadequate governance structures.”

Urgency Call For Crypto Regulation 

In his opinion, there still exists the possibility of having more crypto projects on the list. Bearing all of these in mind, there is a more urgent need for crypto regulation for these “speculative assets” that “lack any intrinsic value.” 

On the other hand, some crypto critics believe that it is better to allow crypto ‘burn’ instead of regulating it. There is a strong belief that crypto regulation will transcend to legitimizing the asset class.

Defending his reservations, Panetta clarified that “it is not certain that crypto assets will ultimately self-combust.” 

The implication on society can also not be overemphasized especially for uninformed investors who would be caught in the web of its volatility. As has been the case in previous times, digital assets are used for tax evasion, evading sanctions, and also for financing terrorist attacks like in the case of Hamas.

In all, the ECB official applauded the European Union Market in Crypto Asset (MiCA) bill which has received Parliament approval. He declared that it was an important step that needed to be fully implemented in no distant time.