On Wednesday, European Central Bank board member Fabio Panetta stated that the regulation of crypto assets is urgently needed to protect investors and maintain the stability of the global financial landscape. This comes after a year of challenges for crypto investors, including the collapse of the FTX exchange, the crash of stablecoin TerraUSD, and the decline of Bitcoin.
Panetta emphasized the need for regulation in order to ensure the safe and responsible use of crypto assets, which are becoming an increasingly important part of the financial system.
In a speech in London, Panetta said:
“This is not just a bubble that is bursting. It is like froth: multiple bubbles are bursting one after another. Investors’ fear of missing out seems to have morphed into a fear of not getting out.”
Unbacked crypto assets, including cryptocurrencies, are a form of virtual or digital currency that are not backed by any government or central authority. While they have gained popularity in recent years, they are often considered to be a risky investment and have often been associated with criminal activity.
According to Panetta, if major tech companies become involved in the cryptocurrency sector, it could lead to a stronger connection between the cryptocurrency market and the traditional financial system, which would make regulation more important and urgent.
In order to protect investors and prevent potential harm to the financial system, it is important to take steps to thwart criminal use of these assets and educate unassuming investors about the risks involved. Additionally, as the financial system may become increasingly intertwined with crypto assets, it is crucial to ensure their safe and responsible use.