The European Central Bank Calls to Create a Global Crypto Regulation System
European Central Bank Board Member Fabio Panetta said that as cryptocurrencies are rapidly spreading around the world, a coordinated effort is needed to regulate them.
In his opinion, in the event of a collapse of the crypto industry, there is a serious threat to the stability of the financial system. This is due to the fact that the current capitalization of digital currencies is about 1% of the global value of financial assets. This figure has already surpassed the size of the US subprime mortgage market when it was worth $1.3 trillion and triggered the global crisis.
According to Panetta, both markets are now showing similar dynamics, and cryptocurrencies are inherently speculative and volatile, and therefore regulators should join forces to minimize risks to financial stability.
He noted that a possible collapse of the crypto market will lead to a shock that both direct investors and service providers can experience. This will affect the entire financial system through a ripple effect. As a result, people may lose faith in the value of crypto assets, which will lead to a decrease in investor confidence in the financial market.
Therefore, politicians should not allow the uncontrolled distribution of digital assets and the risks associated with them, Panetta stressed. And the differences in the policies of different states regarding cryptocurrencies (from complete prohibition to restrictions on use or unhindered acceptance) only increase the risks. Therefore, it is necessary to develop global rules for regulating cryptocurrencies.
Panetta is sure that in order to achieve this goal, it is necessary to introduce similar standards for cryptocurrencies, as they apply to the entire financial system. FATF rules, KYC and AML/FT procedures should be standardized (rules should also apply to peer-to-peer transactions). It is necessary to introduce a fair and consistent system of taxation across all jurisdictions, tighten disclosure rules, including regulatory reporting, as well as introduce strict requirements for business transparency in the industry and establish standards of conduct for service providers to protect retail investors.
The representative of the European Central Bank added that in order to achieve these goals, many difficult trade-offs will have to be made, balancing the goals of promoting innovation and maintaining financial stability, while ensuring the protection of consumer rights.
Earlier, the Bank of Japan called on the G7 countries to immediately create and adopt a common regulatory framework for cryptocurrencies, which will prevent the possibility of circumventing international sanctions.