ECB officials are calling for tighter control of the ‘Wild West’ cryptorum

European Central Bank officials reinforce calls for tighter regulation of cryptocurrencies, comparing the industry to a “wild west” or “medieval” payment solution.

An uncontrolled spread of crypto and stack coins risks returning to periods when people traded in privately issued banknotes backed by dubious assets, said French board member Francois Villeroy de Galhau, calling the situation “a poor response to a real challenge.”

“Unregulated crypto would mean regression and return to private fragmentation,” he told a Financial Times event on Tuesday. “This is truly the last thing we need in our world.”

The comments follow one of the ECB’s harshest assessments of the cryptocurrency world, delivered a day earlier by Villeroy’s colleague Fabio Panetta. The board member said cryptocurrencies “create a new wild west”, comparing its dynamics to the subprime lending market that triggered the global financial crisis in 2008.

While agreeing with the comparison, Villeroy also drew parallels to Europe’s Middle Ages.

“At the time, we had very different assets and currencies with limited geographic constituencies,” he said. “That’s not how I see the process in the global payment system.”

About a hundred central banks are in various stages of exploring their own responses to crypto innovations after being alarmed by the popularity of assets like Bitcoin seeking to bypass centralized payment systems.

The ECB has indicated that it may launch a digital euro in the middle of this decade, potentially enabling consumers to use electronic money, which is a direct responsibility of the central bank, rather than commercial lenders or other payment service providers.

Villeroy said central banks should innovate themselves and contribute to cryptocurrency regulation. Panetta supported a similar approach on Monday.

“The growth of cryptocurrencies markets reveals society’s growing demand for digital assets and instant payments,” he said. Still, “now is the time to ensure that cryptocurrencies are used only within clear, regulated boundaries and for purposes that add value to society.”

© 2022 Bloomberg LP

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