- FTX’s collapse will lead to crypto assets moving to decentralized exchanges, Panetta believes.
- He advised policymakers worldwide to ban digital assets with huge environmental impacts.
- Panetta called for harmonizing taxation policies around cryptocurrencies, stressing that doing so reduces environmental costs.
- In addition, the official said authorities must address tax evasion issues and illicit cryptocurrency use.
As a result of the FTX saga, Fabio Panetta, a member of the executive board of the European Central Bank (ECB), believes more investors will now begin to move their crypto assets from centralized to decentralized exchanges.
Panetta, in a December 7 statement for the Insight Summit at the London Business School, said this development might ferment new risks owing to the absence of a central governance body in decentralized exchanges.
The board member, however, advised policymakers across the globe to ban every digital asset that hugely impacts the environment. According to him, this will help minimize risks occasioned by these assets.
Further, Panetta called for a global harmonization of taxation policies around cryptocurrencies, stressing that doing so helps reduce energy and environmental costs incurred in mining and validation.
The Growing Use of Crypto for Illicit Purposes is a Concern for Panetta
According to the executive, authorities across the globe also need to address the issues of tax evasion and illicit use of cryptocurrencies which have come to light in recent times.
"The use of crypto-assets for money laundering and terrorist financing could be prevented by applying the standards set by the Financial Action Task Force," Panetta said.
Panetta believes the crypto sphere is vulnerable to numerous risks because crypto firms have insufficient transparency and disclosure mechanisms. Furthermore, he asserts that the inadequate governance of crypto firms has magnified these structural flaws and cites the recent FTX collapse as an example.
“Insufficient transparency and disclosure, the lack of investor protection, and weak accounting systems and risk management were blatantly exposed by the implosion of FTX," he noted.
The European apex bank has been unrelenting in its quest to initiate a stricter crypto regulatory framework capable of redefining and giving consistency to the activities of the assets.
The ECB aims to harmonize the framework across European nations and beyond. According to the bank, the framework will address prevailing issues of the Capital Requirements Directive (CRD) criteria when evaluating licensing requests covering crypto-asset activities and services.
On the Flipside
- Although Panetta doesn’t seem optimistic about crypto, he still believes we may not be in the “endgame” for crypto. Nevertheless, he anticipates investors will continue to gamble on crypto with speculative positions.
Why You Should Care
FTX’s recent collapse has forced many firms worldwide to file for bankruptcy, greatly impacting customers. In light of these issues, authorities are developing comprehensive regulations to protect users worldwide. Panetta’s recent statement signals stricter crypto regulations in the European region.
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