European Central Bank’s Fabio Panetta calls for stricter regulation of crypto market
Cryptocurrencies should be regulated and taxed in the same way as gambling, one of the European Central Bank’s (ECB) top officials has said.
taly’s Fabio Panetta, who sits on the European Central Bank’s six-member executive board, said last year’s crypto market meltdown “caught millions of investors off guard”.
“Uninformed investors were left with significant losses,” he wrote in a blog post published on Thursday. “It is not just cryptos that are being burnt.”
His comments came the same day as Alex Mashinsky, the co-founder of insolvent crypto lender Celsius Network, was sued for fraud by the New York attorney general.
Mr Mashinsky is accused of repeatedly making false and misleading statements about the lender’s safety, leading investors “down a path of financial ruin”.
In his blog post, Mr Panetta called for stricter regulation of crypto lenders such as Celsius, as well as wallet services, which are not part of the EU’s new ‘markets in crypto assets’ law.
“Regulation should acknowledge the speculative nature of unbacked cryptos and treat them as gambling activities,” Mr Panetta wrote.
“Vulnerable consumers should be protected through principles similar to those recommended by the European Commission for online gambling. They should be taxed in accordance with the costs they impose on society.”
The EU’s new crypto law – which is expected to apply from 2024, pending a vote by MEPs – regulates crypto issuers and exchanges, such as Sam Bankman-Fried’s failed FTX, rather than targeting bitcoin, ethereum or other crypto assets directly.
It gives traders a passport to operate across the EU in exchange for complying with strict consumer protection laws, which will be overseen in Ireland by the Central Bank.
Companies trading in stable coins – crypto assets linked to currencies or commodities, like the recently collapsed terraUSD – will be subject to stricter rules.
While Mr Panetta said the new EU regulation was an “important step”, he said regulators need to go beyond it.
ECB president Christine Lagarde said last month that the EU’s new crypto law may not be “enough” and that there may be a need to go further.
Last year saw the unravelling of the crypto market after a bullish 2021, when crypto traders borrowed heavily to finance bigger bets on crypto assets.