In an official blog post, the European Central Bank (ECB) has urged that cryptocurrency users should be given protection under online gambling laws.
The crypto crash of 2022 has been devastating for the industry and has led to regulatory policies being altered all across the globe. In the blog post, an executive board member of the ECB suggested that the crypto industry should be scrutinized strictly.
Fabio Panetta, the ECB executive, has mentioned that crypto investment could be treated similarly to gambling and also added that, just like gambling, crypto trading barely has any economic value.
Investor confidence has gradually eroded as a result of the recent market collapse and FTX crash, and the ECB believes that stricter laws are needed to protect investors.
Fabio Panetta has called digital assets an “unbacked” asset and also a “speculative investment,” given the highly volatile nature of the assets and their ties to illicit activities such as money laundering, tax evasion, and sanctions evasion.
In his remarks, Panetta also stated that 2022 “marked the unravelling of the crypto market as investors moved from the fear of missing out to the fear of not getting out.”
Implementation Of Gambling Laws
Panetta also stated that, while enacting these regulations, the agency should refer to and borrow from the gambling laws that exist in the market. He also stated that there must be methods to identify problems caused by digital assets, such as money laundering, sanction evasion, and terror financing.
If crypto regulations are not established or followed, then there will be severe impacts on the broader traditional financial market.
The current happenings within the crypto space have had minimal impact on the traditional financial market, which is why the sector has been allowed to “burn out.” However, despite the option of allowing the industry to “self-combust,” crypto has the potential to cause major issues considering the associated risks.
ECB Pointed Out Intrinsic Flaws
Cryptocurrencies are unbacked, so they are entirely speculative, hence the regulations will treat them similarly to gambling by imposing similar taxes and consumer protection measures.
The regulatory efforts will need a global reach and it will safeguard against the lobbying efforts that will be effective in order to make the industry accountable and responsible.
The imperative need for regulation is that crypto users should not be left to bear the responsibility of their assets by just themselves. Even in terms of investment, digital assets have not proven to be a good choice. Digital assets do not have insurance schemes, and they remain prone to various kinds of IT and cyber risks.
Due to the absence of these protection schemes, investments once lost will receive no compensation. Panetta stated that not just for crypto, there have been certain regulations surrounding the Central Bank Digital Currencies (CBDC) to counter the impact of private digital assets.
It has been noted particularly that the ECB has been one of those central banks all across the globe that is in the advanced stages of researching a potential CBDC.