An executive board member of the European Central Bank (ECB), Fabio Panetta, has predicted a bleak future for cryptocurrencies, one in which investors may mostly use digital assets for gambling.
ECB Official Fabio Panetta Speaks Harsh Words for Crypto
Due to their limitations, cryptos have not developed into a form of finance that is innovative and robust, but have instead morphed into one that is deleterious. The crypto ecosystem is riddled with market failures and negative externalities, and it is bound to experience further market disruptions unless proper regulatory safeguards are put in place.
Panetta
The impression of cryptocurrencies among investors as a reliable store of wealth started to wane in late 2021 and into 2022, when the overall market capitalization dropped by more than $1 trillion, according to Panetta’s written remarks for a panel at the Bank for International Settlements Annual Conference on June 23. The ECB official claimed that because crypto assets were so volatile, they were appropriate for gambling and that international politicians should handle them as such.
Policymakers should be wary of supporting an industry that has so far produced no societal benefits and is increasingly trying to integrate into the traditional financial system, both to acquire legitimacy as part of that system and to piggyback on it.
Panetta
Cryptocurrencies are Unreliable, Non-Scalable and Non-Centralized
Panetta’s statements were shared on the ECB’s official Twitter account.
Asserting that the immutability of blockchains is a drawback of the field since transactions are frequently difficult to be reversed, Panetta said that the security, scalability, and decentralization of crypto transactions were not achievable. As examples of the ecosystem’s inherent flaws, he referenced the demise of FTX and a recent lawsuit filed by the US Securities and Exchange Commission against Binance.
Crypto enthusiasts would do well to remember that new technology does not make financial risk disappear. It is like pressing a balloon on one side: it will change in shape until it pops on the other side. And if the balloon is full of hot air, it may rise for a while but will burst in the end.
Panetta
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