A member of European Central Bank’s (ECB) executive board has pushed for stringent regulations on cryptocurrencies to avert any ‘instability and insecurity' in the financial sector.
Fabio Panetta, a member of the ECB's executive board, said that the virtual currencies like bitcoin, Ethereum, etc., have been able to dodge rules and regulations. Also, the authorities from various nations are taking a closer look given the threat cryptocurrencies could pose to financial systems due to volatility and the increasing size of the market.
Delivering a speech in New York, Panetta said that the current regulatory approaches differ across countries. Some countries have banned crypto-assets outright while others have restricted their use. This situation is unsatisfactory, as crypto-assets are a global phenomenon and their underlying technologies can play an important role, not only in finance.”
“We need globally coordinated regulatory action to address issues such as the use of crypto-assets in cross-border illicit activities or their environmental footprint,” he said.
He also suggested that the regulation should balance the risks and benefits so as not to stifle innovation that could stimulate efficiency in payments and broader applications of these technologies.
Panetta opined that the global crypto market is now larger than the sub-prime mortgage market was when it was worth $1.3 trillion and triggered the global financial crisis (in 2007). In his view, there are some strikingly similar dynamics in both eras.
Panetta is not the only central bank officer who has stressed the need of regularising virtual currencies. Earlier, Reserve Bank of India Governor Shaktikanta Das had also described the cryptocurrencies as “serious threat to any financial system.”
“Cryptocurrencies are serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well as their claimed market value,” he said.