Cryptoassets should be banned if they are too energy-intensive, European Central Bank board member Fabio Panetta said, in a Wednesday speech which heightened previous criticism of private digital currencies.
Investors had been caught in the “textbook definition of a bubble,” lured by the promise of ever-rising prices, Panetta said, in remarks which echo earlier criticism that the unregulated sector was like a “Ponzi scheme” and a “Wild West.”
Though the collapse of FTX had revealed flaws in accounting and risk management, he said crypto would likely “continue to attract investors looking to gamble” – a risky activity he wants to keep sealed off from traditional finance.
“It is difficult to see a justification for the existence of unbacked crypto-assets in the financial landscape,” he added, saying they were too volatile and inefficient to use for regular payments.
The FTX debacle would likely send investors towards decentralized exchanges, he said – adding that these will be harder to regulate, and are liable to amplify financial shocks.
“Crypto-assets deemed to have an excessive ecological footprint should also be banned,” he said, in a likely reference to currencies such as bitcoin (BTC) which use an energy-intensive proof-of-work mechanism.
ECB skepticism about crypto is nothing new, and two staffers last week said bitcoin is on the “road to irrelevance.” Panetta is currently considering whether the central bank itself should issue a digital currency, and earlier Wednesday set out some of the criteria for apps and wallets using the digital euro.
Read more: Bitcoin’s Last Stand: ECB Staffers Say the Crypto Is on ‘Road to Irrelevance’
