In a scathing speech, Fabio Panetta, an executive board member of the European Central Bank (ECB), expressed his belief that cryptocurrencies offer little more than a platform for gambling among investors. Panetta delivered his remarks during a panel at the Bank for International Settlements Annual Conference on June 23.
Panetta highlighted the decline of cryptocurrencies’ perception as a “robust store of value” since late 2021, when the total market capitalization plummeted by over $1 trillion. He attributed this loss of confidence to the highly volatile nature of crypto assets, suggesting that they are more suited for gambling activities than as a stable investment. He emphasized the need for global lawmakers to recognize this reality and treat cryptocurrencies accordingly.
The ECB official criticized the crypto ecosystem, describing it as “deleterious” and plagued by market failures and negative externalities. Panetta warned that without adequate regulatory measures in place, the industry is likely to face further market disruptions. He cautioned policymakers against supporting an industry that, in his view, has yet to deliver any societal benefits and is primarily seeking integration into the traditional financial system for legitimacy and advantage.
Panetta specifically criticized the security, scalability, and decentralization of crypto transactions, arguing that these characteristics are unattainable. He pointed to the immutability of blockchains as a negative aspect, citing instances where transactions cannot be reversed, such as the collapse of FTX and a recent lawsuit by the United States Securities and Exchange Commission against Binance. According to Panetta, these incidents represent fundamental shortcomings within the crypto ecosystem.
The ECB official reminded crypto enthusiasts that new technology does not eliminate financial risks. He used the analogy of pressing a balloon, suggesting that when pressure is applied on one side, it will eventually burst on the other side. Panetta warned that if a balloon is filled with hot air, it may rise temporarily but will ultimately burst.
It is worth noting that Panetta has previously supported aspects of the ECB’s exploration of a potential digital euro. He has also proposed the banning of crypto assets with excessive environmental impact as part of the ECB’s efforts to address environmental risks.
In conclusion, Fabio Panetta’s speech painted a bleak picture of the future of cryptocurrencies, portraying them as platforms for gambling with limited societal benefits.
He called for regulatory safeguards and criticized the perceived limitations and failures of the crypto ecosystem.
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