Cryptocurrency investing is like betting on race horse races, a top central banker said on Wednesday.
European Central Bank board member Fabio Panetta says cryptocurrencies “urgently” need more regulation.
The economist called out digital asset investments and product offerings that promised high-returns for users, describing parts of the industry as a “bubble doomed to burst.”
“There is an urgent need globally for regulation to protect consumers from the risks of crypto-assets, define minimum requirements for crypto firms’ risk management and corporate governance, and reduce the run and contagion risks of stablecoins,” Panetta said in a speech at the Insight Summit.
Panetta added: “We should also tax crypto-assets according to their social costs.”
Cries for a regulatory crackdown and stricter risk management have grown following the catastrophic meltdown of Sam Bankman-Fried’s crypto exchange, FTX.
“This is not just a bubble that is bursting. It is like froth: multiple bubbles are bursting one after another,” Panetta said, citing the crash of algorithmic stablecoin TerraUSD earlier this year. “The crypto dominos are falling, sending shockwaves through the entire crypto universe, including stablecoins and decentralised finance (DeFi).”
The industry has been hit with a series downfalls from the space’s biggest and most influential players.
Besides FTX, Three Arrows Capital, the overleveraged crypto hedge fund toppled by the collapse of Terra, filed for bankruptcy, along with digital asset brokerage Voyager. Centralized lender Celsius became insolvent and lost customer deposits, landing the company in bankruptcy court as well.
He added: “Does this mean we are witnessing the endgame for crypto? Probably not. People like to gamble. On horse races, football games and many other events,” Panetta said. “And some investors will continue to gamble by taking speculative positions on crypto-assets.”