ECB Official Criticizes Crypto as ‘Deleterious’ and Highlights Lack of Societal Benefits in Harsh Address

Fabio Panetta, a member of the executive board of the European Central Bank (ECB), has expressed a pessimistic outlook for cryptocurrencies, suggesting that they may primarily serve as instruments for speculative gambling among investors.

In a written statement for a panel discussion at the Bank for International Settlements Annual Conference on June 23, Panetta pointed out that the perception of cryptocurrencies as a “reliable store of value” began to fade in late 2021 and 2022, as the total market capitalization plummeted by over $1 trillion. The ECB official highlighted the highly volatile nature of crypto assets, deeming them more suitable for speculative gambling rather than as stable financial instruments, and called for global policymakers to treat them accordingly.

Panetta stated, “Cryptos have not evolved into an innovative and robust form of finance, but rather have become deleterious. The crypto ecosystem is plagued by market failures and negative externalities, and it is destined to experience further disruptions unless proper regulatory safeguards are implemented.”

He further emphasized, “Policymakers should exercise caution in endorsing an industry that has thus far failed to deliver any significant societal benefits and is increasingly seeking integration into the traditional financial system, both to gain legitimacy and to capitalize on it.”

According to Panetta, the security, scalability, and decentralization of crypto transactions are unattainable. He regarded the immutability of blockchains as a drawback, as it often renders transactions irreversible. Panetta cited the collapse of FTX and the recent lawsuit filed by the United States Securities and Exchange Commission against Binance as fundamental flaws within the crypto ecosystem.

Panetta cautioned, “Crypto enthusiasts should bear in mind that new technology does not eliminate financial risks. It is like pressing a balloon on one side; it may change shape but will eventually burst if filled with hot air.”

It is worth noting that Panetta has previously expressed support for certain aspects of the ECB’s research on a potential digital euro. He has also proposed the prohibition of crypto assets with excessive environmental footprints as part of the ECB’s efforts to address environmental risks.

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