Crypto is “the Wild West of finance” and needs global cooperation to bring it under control, says a director of the European Central Bank.
Speaking at Columbia University, Fabio Panetta said that a global level of cooperation would be required to ensure peer-to-peer transactions complied with anti-money laundering (AML) and terrorism laws.
He said that bitcoin founder Satoshi Nakamoto showed a great fascination with cryptography in the whitepaper, but “not of payment and money issues.
“They aspired to realize an anarchistic utopia of a stable currency free from public scrutiny,” he added.
He lists the following criticisms of the crypto market: volatility, lengthy transfer times, and the traceability of transactions that some claim to be anonymous.
Crypto brings instability and insecurity, claims director
Furthermore, he also says that intermediaries do exist in the field of decentralized finance. And goes on to say that crypto brings instability and insecurity, which is creating a new Wild West.
Panetta calls for lawmakers to introduce regulations to prevent “crypto-assets and the associated risks from proliferating unchecked.” Two priorities he lists are AML and counter-terrorism (CFT) laws, as well as the adequate taxation of crypto assets.
He also says that public disclosure and regulatory reporting need to be strengthened.
Authorities are working on these matters, and at least on the subject of taxation, there has been a lot of activity. Broader frameworks could be expected by the end of the year.
Not everyone will agree with Panetta, especially not crypto enthusiasts. While some of his criticisms hold true, many are misleading or false.
Decentralized Finance, for instance, can be very decentralized indeed, even if not on the scale that crypto supporters would like.
The European Union (EU) parliament recently voted in favor of an amendment that would affect unhosted crypto wallets. The U.S. Treasury is also considering this rule.
The switch to DeFi and decentralized wallets is becoming a theme among governments. The International Monetary Fund has also said that DeFi poses risks to financial markets and needs regulations.
However, how exactly these laws would achieve their goals remains to be seen, given that decentralized tech, by its very nature, is largely uncontrollable.
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