(Finance) – “I crypto-asset they have been promoted as decentralized alternatives that promise more resilient financial services. However, the reality does not live up to that promise. The blockchain technology underpinning crypto-assets can be extremely slow, energy-intensive, and not scalable enough,” he said. Fabio Panettaa member of the Executive Board of the ECB, in a speech in Basel, underlining that “the practicality of crypto-assets for day-to-day transactions is low due to their complex management and significant price volatility”.
According to Panetta, to address these drawbacks the crypto ecosystem has changed its narrative, favoring more centralized forms of organization that emphasize speculation and profit. “But the recent events have highlighted the fragility of the ecosystem of cryptocurrencies, demonstrating how quickly trust in crypto-assets can evaporate,” he said. “In many respects, this ecosystem has recreated the very shortcomings and vulnerabilities that blockchain technology was initially intended to address.”
Complicating things further – argued the Italian economist – is the fact that the cryptocurrency market is looking for “theintegration in the financial sector for increased relevance and support of the public sector”. “This would not provide the foundation for a sustainable future for cryptocurrencies – he highlighted – If anything, it would only increase contradictions and vulnerabilitiesresulting in greater instability and centralization”.
According to Panetta, the public sector “should adopt a determined position by establishing a comprehensive regulatory framework that addresses the social and environmental risks associated with cryptocurrencies, including the use of unsecured crypto-assets for speculative purposes”. it should also”resist calls to provide state support to cryptocurrencies, which would essentially socialize crypto risks.”
Ultimately, the public sector should instead “focus its efforts on the contribution to the development of reliable digital assetsincluding through its work on central bank digital currencies.”