- Fabio Panetta has proposed heavier taxes and more stringent anti-money laundering requirements
- He argued that the continued correlation of crypto assets with the equities could be potentially destructive to the financial system
Italian economist and ECB board member in charge of steering the creation of a digital Euro, Fabio Panetta, has called for coordinated efforts by global regulatory authorities to launch additional measures toward regulating the cryptocurrency sector.
According to an extract from a published speech, Panetta argued the idea of cryptocurrencies to create a trustworthy coin remains a dream, observing that currently, crypto tokens take long periods to transfer and are a source of instability and insecurity.
Labelling crypto a Ponzi scheme that relies on greed, he recommended this asset space be heavily taxed and undergo more intense anti-money laundering requirements. Panetta also proposed that improved disclosure and transparency requirements are exerted on this nascent asset class
“Now is the time to ensure that crypto-assets are only used within clear, regulated boundaries and for purposes that add value to society. And it is time for policymakers to respond to the people’s growing demand for digital assets and a digital currency by making sovereign money fit for the digital age.”
Noting the need to wholly cover the space, the former Director General of the Bank of Italy argued the need to also focus on unbacked crypto assets that reign free of service providers and peer-to-peer payments.
The negative side of cryptocurrencies
The ECB board executive explained that crypto assets also present risks to the traditional financial system, given that the tokens have shown positive co-movement with equities since 2020. Panetta added that such is the effect of cryptocurrencies that crypto whales losing value in their holdings could affect traditional finance in which these same wealthy investors have a ‘say.’
He justified that the regulation of the cryptocurrency space is essential to avoid the use of these assets to dodge legal requirements such as taxes as well their potential role in evading sanctions. Panetta explained that criminals and foul actors often channel their resources via crypto assets, noting that 23% of all transactions each year are involved with crime.
“Research suggests that as much as USD 72 billion per year, or about 23% of all transactions, is associated with criminal activities. Ransomware attackers usually demand crypto payments,“ he observed.
Panetta also decried the high energy use of proof of work consensus blockchains. He set forth that crypto tokens such as Bitcoin usually incentivise users to endlessly cause intensive energy consumption, making it a never-ending cycle of pollution and damage to the environment.
He further argued that even where renewable energy or less intensive validation techniques are used, such power could be used elsewhere.