- Fabio Panetta foresaw a bleak future for cryptocurrencies.
- He admitted that the blockchain trilemma of crypto was “not achievable.”
Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB), has blasted “crypto failure.” As per the executive, the crypto industry has failed to deliver on its promises.
Panetta foresees a bleak future for cryptocurrencies, predicting that crypto assets would be of little use other than gambling. He made these observations as part of written remarks for a panel at the Bank for International Settlements (BIS) Annual Conference held on 23 June.
Panetta: “New technology does not make financial risk disappear”
Panetta said that beginning late 2021 and into 2022, investors could no longer see crypto as a “robust store of value.” This was when the total market capitalization fell by more than $1 trillion.
The ECB executive said:
“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 cautioned policymakers that they should be wary of supporting the crypto industry, given that it has so far delivered no public advantages. Besides, it is continuously attempting to integrate into the established financial system — both to gain credibility as a part of it and to piggyback on it.
Panetta also alleged that the “security, scalability and decentralization” of crypto transactions was “not achievable.” He cited the immutability of blockchains as a disadvantage since it is frequently not possible to reverse transactions. He cautioned crypto enthusiasts, saying:
“New technology does not make financial risk disappear.”
Panetta has previously supported parts of the ECB’s plans for a potential digital euro, which the central bank is now researching. He is also of the opinion that crypto assets having an “excessive ecological footprint” should be banned.
The ECB has also consistently advised banking institutions to maintain substantial levels of precautionary capital for “risky” assets. This was despite the fact that a February regulatory survey assessed crypto operations and exposures as small.
