Crypto assets should be banned if they are too energy intensive, European Central Bank board member Fabio Panetta said in a Wednesday speech that added to the ECB's previous criticism of private digital currencies.
Investors have been caught in the “textbook definition of a bubble,” lured by the promise of ever-rising prices, Panetta said in remarks that echo earlier criticism that the unregulated sector is like a “Ponzi scheme” and a “Wild West.”
Though the collapse of crypto exchange FTX has revealed flaws in accounting and risk management, Panetta said crypto would likely “continue to attract investors looking to gamble” – a risky activity he wants to keep sealed off from traditional finance.
"It is difficult to see a justification for the existence of unbacked crypto assets in the financial landscape,” he added, saying they are too volatile and inefficient to use for regular payments.
The FTX debacle will likely send investors toward decentralized exchanges, he said – adding that those exchanges will be harder to regulate and are liable to amplify financial shocks.
“Crypto assets deemed to have an excessive ecological footprint should also be banned,” he said, in a likely reference to platforms like Bitcoin that use an energy-intensive mechanism known as "proof-of-work" to validate transactions and secure their network.
The ECB's skepticism about crypto is nothing new. Two staffers last week said bitcoin (BTC) is on the “road to irrelevance.” Panetta is considering whether the central bank itself should issue a digital currency, and earlier Wednesday, he set out some of the criteria for apps and wallets using the digital euro.
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