The European Central Bank (ECB) is raising its tone. Fabio Panetta, member of the ECB’s executive board in charge of the digital euro project, gave a damning assessment of the state of the cryptocurrency sector, while calling for action to regulate this market more strictly. A market now seen by the European authorities as speculative and carrying potentially disastrous consequences on the stability of the financial system in the medium term.
“With unbacked cryptocurrencies, no one is responsible and this makes them purely speculative in nature, and therefore very volatile”, warned the leader during a speech held at the prestigious Columbia University. , At New York. And compare the current state of the cryptocurrency market to a Ponzi scheme. “As in a Ponzi scheme, such a dynamic can only continue as long as an increasing number of investors believe that prices will continue to rise and that there can be value not backed by an income stream or to a guarantee. Until the enthusiasm subsides and the bubble bursts,” argues Fabio Panetta.
“Cryptoassets are speculative assets that can cause significant harm to society. Right now, they derive their value primarily from greed: they rely on the greed of others and the hope that the system will continue unhindered. Until this house of cards collapsed, leaving people buried under their losses, ”he also believes. Strong expressions that say a lot about the concern of European financial circles.
The ECB bets on CBDCs
While caution is warranted, the weight of crypto-assets is still relative, as they currently represent only 1% of total financial assets in the world. Consequently, links with the broader financial system are still limited. However, this could change quickly if, for example, a large technology company launched a cryptocurrency, warns Fabio Panetta. “By tapping into their vast customer bases and consolidating payments and other financial services, big tech companies could significantly strengthen the ties between the crypto-asset ecosystem and the wider financial system. »
To remedy the problem, the ECB intends to bet on issuing CBDCs (central bank digital currencies), such as the proposed digital euro and China digital yuan. “We need a globally coordinated effort to bring crypto-assets into the scope of regulation. And we must ensure that they are subject to standards in line with those applied to the financial system,” says Fabio Panetta. And to call for the establishment of harmonized rules at the global level to prevent the use of cryptocurrencies for money laundering and the financing of terrorism.
Faced with the growing demand from the general public for digital assets and instant payments, Fabio Panetta recognizes that it is up to public authorities such as central banks to meet this demand. “Central banks need to further engage in digital innovation by modernizing wholesale financial infrastructure, leveraging fast retail payment systems, and preparing for the issuance of central bank digital currencies,” a- he declared.
Source: ZDNet.com