ECB Wants To Monitor Crypto Under Gambling Laws

The crypto crash of 2022 was catastrophic for the sector and prompted policy changes in regulatory frameworks worldwide. An ECB executive board member argued in a blog post that the cryptocurrency sector required close monitoring. The ECB executive Fabio Panetta has suggested that cryptocurrency investment be viewed like gambling, and he has also stated that cryptocurrency trading has very little economic value. Nevertheless, the ECB believes stricter laws are necessary to protect investors in light of the gradual erosion of investor confidence brought on by the recent market collapse and the FTX crash.

Due to their high volatility and links to illegal activities like money laundering, tax evasion, and sanctions evasion, Fabio Panetta has labeled digital assets as an "unbacked” asset and a “speculative investment.”

Panetta added in his remarks that 2022 "marked the unraveling of the crypto market as investors moved from the fear of missing out to the fear of not getting out."

Panetta added that the agency enforcing these rules should consider and borrow provisions from existing gambling laws. In addition, he stressed the need for mechanisms to detect illicit activities associated with digital assets. There will be severe repercussions for the conventional financial system if proper crypto regulations are not established and enforced.

It has been allowed to “burn out” because the current events in the crypto space have had little effect on the traditional financial market. Despite the possibility of letting the industry “self-combust,” crypto presents significant risks and has the potential to wreak havoc. Unbacked cryptocurrencies are entirely speculative, so regulators will likely apply the same taxes and consumer protection measures as they do to the gambling industry. To make the industry accountable and responsible, regulatory efforts must have a global reach and protect against effective lobbying.

Users of cryptocurrencies shouldn't have to shoulder the burden of protecting their assets on their own, which is why regulation is crucial. Even as an investment vehicle, digital assets have yet to fare well. There are currently no insurance policies for digital assets, making them vulnerable to a wide range of IT and cyber threats.

Furthermore, there is no recourse for lost investments because of the lack of such safeguards. Panetta stated that the impact of private digital assets had prompted regulations surrounding Central Bank Digital Currencies (CBDC), not just cryptocurrency. Among the many international central banks actively exploring the possibility of a CBDC, the European Central Bank (ECB) has drawn particular attention.