Central bank digital currency (CBDC) proponent and cryptocurrency skeptic, Fabio Panetta, presented his most recent case on January 5th. While discussing crypto and CBDCs on the ECB’s official blog, he expressed how they “will safeguard the trust on which private forms of money ultimately depend.”
Heavy criticism of cryptocurrencies
In the ECB’s blog, Panetta said how investors moved from the fear of missing out (FOMO) to the “fear of not getting out.” He pointed to a collapse of TerraUSD stablecoin, which resulted in a chain of collapses of several other platforms.
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Panetta thinks other companies will fail in the upcoming months as well. He said these failures came very fast, reflecting “crypto players’ incredibly high leverage, their interconnectedness across the crypto ecosystem and their inadequate governance structures.”
Crypto assets may or may not self-destruct in the long run, despite their inherent problems, Panetta explained. Consider crypto assets that have no backing. Not only are they rarely used as payment, but they also aren’t used to pay for anything, so they don’t contribute to the economy in any way.
“As a form of investment, unbacked cryptos lack any intrinsic value, too. They are speculative assets. Investors buy them with the sole objective of selling them at a higher price. In fact, they are a gamble disguised as an investment asset,” he claimed.
Panetta went on to say this is precisely why we cannot hope for their eradication. Gambling has always existed in a wide variety of forms. And in the modern era of digital currencies, unbacked cryptocurrencies will most likely remain a medium for betting.
“The cost to society of an unregulated crypto industry is too high to ignore. For one, this year’s crypto market meltdown caught millions of investors off guard. Uninformed investors were left with significant losses. It is not just cryptos that are being burnt,” he explained.
Furthermore, unregulated crypto assets can be utilized in illegal activities like money laundering, terrorist financing, and sanction dodging. In addition, they have significant negative effects on our environment, he said in the blog.
This has been an old song sung a thousand times by central bankers, claiming crypto is all bad. However, money laundering has been here ever since, even with fiat currencies. New regulations and the ban on Tornado Cash actually make it harder for money launderers.
Bottom line
The member of the ECB’s executive board expressed his dislike of cryptocurrencies and how this industry needs more regulation. This is easier said than done. Regulators must walk a tightrope, he said. Panetta also sees the EU’s Regulation on Markets in Crypto-Assets as a crucial step.
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He concludes by saying the world needs a solid digital finance ecosystem with risk-free and dependable digital settlement assets, pointing to CBDCs. Panetta explained that the ECB and other central banks are working on digital currencies, confirming their upcoming arrival.
It’s interesting to see how the ECB official tries to shed a bad light on crypto in its most difficult times and praises CBDCs, which aren’t even in circulation yet. The central banks are trying their best to push the new money through, but they don’t even mention a single disadvantage of CBDCs. Why is that?
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