![]() Today I will argue that at present crypto-assets are not only speculative and high-risk investments, but they also raise public policy and financial stability concerns. And it is time for policymakers to respond to the people’s growing demand for digital assets and a digital currency by making sovereign money fit for the digital age. Now is the time to ensure that crypto-assets are only used within clear, regulated boundaries and for purposes that add value to society. And while some may hope to be smarter and get out in time, many will be trapped. We must not repeat the same mistakes by waiting for the bubble to burst, and only then realising how pervasive crypto risk has become in the financial system. Limited understanding of risks, fear of missing out and intense lobbying of legislators drive up exposures while slowing down regulation. In the absence of adequate controls, crypto-assets are driving speculation by promising fast and high returns and exploiting regulatory loopholes that leave investors without protection. And it shows strikingly similar dynamics. Indeed, the crypto market is now larger than the sub-prime mortgage market was when – worth USD 1.3 trillion – it triggered the global financial crisis. ![]() However, it only takes a few to climb high on the ladder – even if their gains are only temporary – to convince many others that they are missing out. The story does not end well for this character. To quote Littlefinger from Game of Thrones, “chaos is a ladder”. In El Salvador, for instance, which is the first country to adopt bitcoin as legal tender, payments are carried out via a conventional centrally managed wallet.Ĭrypto-assets are bringing about instability and insecurity – the exact opposite of what they promised. ![]() A large majority of crypto holders rely on intermediaries, contrary to the avowed philosophy of decentralised finance. The supposedly anonymous transactions leave an immutable trail that can be traced. Satoshi Nakamoto’s dream of creating trustworthy money remains just that – a dream.Ĭrypto-asset transfers can take hours to process. Crypto evangelists promise heaven on earth, using an illusory narrative of ever-rising crypto-asset prices to maintain inflows and thus the momentum fuelling the crypto bubble.īut appearances are deceptive. An ecosystem has emerged, from miners to intermediaries, all seeking to expand into digital finance. Crypto enthusiasts marvel at the rise of the crypto market, with many feeling they should take their chances on the crypto gamble. They aspired to realise an anarchistic utopia of a stable currency free from public scrutiny.Īlmost 15 years on, crypto-assets are what everyone’s talking about. Their 2008 white paper shows a great fascination with technology, notably cryptography, but not necessarily an in-depth understanding of payment and money issues. Satoshi Nakamoto – or rather the software developers using that pseudonym – created the source code of what they thought could be decentralised digital cash. Greed and lawlessness turned this promised land into the Wild West, where the few exploited the dream of the many.įast-forward a century and a half and, amid the global financial crisis, growing distrust of banks, coupled with technological innovation, gave rise to a new dream – a digital gold rush beyond state control. Speech by Fabio Panetta, Member of the Executive Board of the ECB, at Columbia Universityġ70 years ago Americans pushed westward across the frontier to seek their fortune in the gold rush.
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