Wednesday, November 29, 2023

ECB Members Pushed For Stricter Crypto Regulations: Report

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ECB members pushed for stricter crypto regulations of the entire crypto ecosystem especially stablecoins as we can see more today in our latest cryptocurrency news.

Fabio Panetta who is a member of the Executive Board of the European Central Bank pushed for stricter regulations on crypto to avoid instability and insecurity on a financial level. Panetta referred to the accelerated growth that the market achieved with a $1.3 trillion valuation which indicated that this is bigger than any high-risk market that was when the global financial crisis of 2008. Panetta indicated that this is a boom based on the speculation and the promise of high and rapid returns and exploited regulatory loopholes that leave investors without protection:

“We must not repeat the same mistakes by waiting for the bubble to burst, and only then realizing how pervasive crypto risk has become in the financial system.”

Panetta noted that although crypto assets are nto speculative and high-risk investmetns but argued that they can affect the state policies and the world’s financial stability. Panetta explained that stablecoins remain a risk to nations whcih is a stance that the ECB already shared with those that are responsible for minting tokens and cannot guarantee redeemability at the part at any time and don’t have access to permanent facilities that are offered by the central bank. He added that a third of the stabelocins launched in the past few years didn’t survive.

fabio panetta
Fabio Panetta, Source Reuters

The ECB members pushed for stricter regulations and according to Panetta, the volatility and the lack of proper backing prevent crypto assets from fulfilling the purpose which is to facilitate the payments and become a better version of traditional money. He said that a 60% drop that BTC had after hitting $68,000, was higher than the one of gold and four times higher than the one of US Stocks:

“[Cryptocurrencies] are simply too volatile to perform the three functions of money: medium of exchange, store of value and unit of account.”

Because of the accelerated adoption of the global crypto ecosystems and Panetta proposed a greater control in the regulatory approach while expressing his concerns about how countries that banned crypto cannot ensure the mandates are 100% effective:

“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. 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 also focused on 4 relevant points to achieve better control of crypto assets and hold them to the same standards as the rest of the system. Also, tax them since the current treatment is minimal but also enhances public disclosure. The new regulation doesn’t seek to stifle innovation but to protect people’s money and saving and it will go a long way to ensure that the banks don’t lose the economic control that they had for years.

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