Cryptocurrency is new Wild West, says ECB executive

Fabio Panetta, a member of the executive board at the ECB, said mayhem turned the promised land into the Wild West, where the few exploited the dream of the many

A European Central Bank (ECB) executive likened the greed and lawlessness of the 1850s U.S. gold rush to today’s digital gold rush, saying that it is out of control.

In a speech at Columbia University Monday, Fabio Panetta, a member of the executive board at the ECB, said mayhem turned the promised land into the Wild West, where the few exploited the dream of the many.

Fast-forward a century and a half and, amid the global financial crisis, growing distrust of banks, coupled with technological innovation, gave rise to a new dream, a digital gold rush beyond state control, he said.

Today, he said, cryptocurrency enthusiasts marvel at the rise of the crypto market, with many feeling they should take their chances on the crypto gamble.

Crypto evangelists promise heaven on earth, using an illusory narrative of ever-rising crypto-asset prices to maintain inflows and thus the momentum fuelling the crypto bubble, Panetta said.

But appearances are deceptive, he added. Crypto asset transfers can take hours to process, prices fluctuate wildly and most crypto holders rely on intermediaries — contrary to the avowed philosophy of decentralized finance, Panetta said.

He continued that now is the time to ensure that crypto assets are only used within regulated boundaries and for purposes that add value to society. It is time for policymakers to respond to the people’s growing demand for digital assets and a digital currency by making sovereign money fit for the digital age, he said.

In a speech before the European Parliament, Panetta emphasized there are many questions that still have to be answered, such as the level of privacy and anonymity, as well as the role of the banking system to hold and distribute retail CBDCs.