In the wake of crises and controversy shaking up the world of global cryptocurrency trading, Fabio Panetta, a member of the European Central Bank’s (ECB) Executive Board, has called for greater oversight.
In a blog post published today on the ECB’s website, Panetta argued that recent developments have heightened the need for greater regulation of cryptocurrency in a number of areas.
Of significance, he stated that because unbacked cryptocurrencies – the value of which is not supported by a backing asset but instead by supply and demand – have a ‘speculative nature’ due to fluctuating in value, these products should be treated as ‘gambling activities’.
“As a form of investment, unbacked cryptos lack any intrinsic value, too,” he explained. “They are speculative assets. Investors buy them with the sole objective of selling them on at a higher price. In fact, they are a gamble disguised as an investment asset.”
He elaborated further: “Vulnerable consumers should be protected through principles similar to those recommended by the European Commission for online gambling. They should be taxed in accordance with the costs they impose on society.”
Like the betting and gaming industry, cryptocurrency is a rapidly evolving market, and in Fanetta’s view regulators must act quickly to ensure that they are keeping pace with new developments.
In particular, he argued that regulators must address how cryptocurrencies can be used for money laundering, terrorist financing and the circumvention of sanctions, as well as the danger to investors of losing vast sums of money.
Calls for greater regulation of cryptocurrency, as well as consideration of blockchain-based products in existing gambling laws, are nothing new.
If anything they have been mounting over the past year as the former sector continued to grow and both sectors increasingly engaged with each other.
For example, the UK Gambling Commission (UKGC) has said on more than one occasion that it aims to take ‘new and emerging’ products, such as NFTs, into account, ahead of the UK Gambling Act review White Paper.
As the two sectors become increasingly intertwined, with crypto accounting for a large number of betting stakes last year – albeit at a lower level than in previous years, according to SOFTSWISS – increased regulation could impact both.
SBC has found that crypto-betting firms remain undeterred by events such as the collapse of FTX, which caused significant turbulence across crypto-markets – for example, BetDEX CEO Varun Sudhakar remained confident in the markets prospects in an interview in November.
However, as Panneta explains, last year’s failures in the crypto space ‘occurred in rapid succession, reflecting crypto players’ incredibly high leverage, their interconnectedness across the crypto ecosystem and their inadequate governance structures’ – and a tougher regulatory outlook could be the end result.