European Central Bank Executive Board member Fabio Panetta on Monday called for new global standards to regulate crypto assets, and also suggested they could be taxed more heavily given their high energy consumption.
According to the published text of a speech to be given later in the day, Panetta said crypto-assets were harmful to society and without social or economic value.
“Crypto-assets are speculative assets that can cause major damage to society,” Panetta said. “They derive their value mainly from greed, they rely on the greed of others and the hope that the scheme continues unhindered.”
But the bubble could burst, he added, comparing crypto dynamics to a “Ponzi scheme,” and showing “strikingly similar dynamics” to the sub-prime mortgages that caused the 2008 financial crisis.
“We must not repeat the same mistakes,” Panetta said in his speech, set to be given at Columbia University in New York at 1 p.m. ET.
“Now is the time to ensure that crypto-assets are only used within clear, regulated boundaries and for purposes that add value to society” to avoid a “lawless frenzy of risk-taking.”
Panetta has been a keen proponent of the ECB issuing a digital euro – perhaps in part because a central bank digital currency could stave off the need for private-sector stablecoins such as tether (USDT) – but has also called for a crackdown on the crypto market more generally.
Tether, the issuer of USDT, has faced legal proceedings regarding the exact content of its reserves – and Panetta warned that holders suddenly seeking to redeem their assets could spread turbulence to commercial debt and banking markets. He added there needed to be an upgrade of disclosure requirements that are at present “highly problematic.”
Crypto-assets are too volatile and transfers take too long to process to be useful as a form of money, are a “potential means” to circumvent financial sanctions, and could also harm investment and climate change, Panetta said.
He called for crypto-assets to be taxed in line with other financial instruments – with extra levies for the most environmentally unfriendly, such as the energy-intensive proof of work mechanism that underpins bitcoin (BTC).
He also called for the extension of anti-money laundering norms, including for peer-to-peer payments – a controversial measure currently under discussion by European Union legislators that some warn could stifle innovation and harm privacy.
A proposed new EU anti-money laundering authority – currently intended to supervise a clutch of major banks and payment companies following a string of scandals at lenders such as Denmark’s Danske Bank – could also cover the riskiest crypto providers, he said.
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