European central bank

European central bank could impose gambling laws onto cryptocurrencies

Last updated: June 11, 2024

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Written by CryptoCasino — Cryptocurrency Specialist with extensive knowledge in blockchain technology and digital currencies. Skilled in analyzing market trends and offering insightful perspectives on crypto currency investments and developments.

A board member of the European Central Bank (ECB), Fabio Panetta, has asked for cryptocurrencies to be covered by gambling laws as talks of regulation begin to stir.

This is the first time a high profile figure from the financial world has pushed for regulation of cryptocurrencies. It could result in European governments sitting up and taking notice and looking into how they can go about creating a centralized structure to monitor the most popular form of digital payment.

This news came in January 2023, after a number of cryptocurrency schemes, coins and platforms witnessed a huge collapse in the end of 2022. The crash saw many retail investors lose money, as trillions of dollars left the cryptocurrency market in a matter of months. Panetta argues that the crashes that occurred across the market were correlated, which therefore exposed severe flaws in the concept and structure of cryptocurrencies. He states that because crypto assets are unbacked and not regulated, they will rarely be used for payments or investments in the wider economy and, as such, will often have no long term social or economic utility.

Therefore, Panetta believes that crypto markets are more often used as a form of gambling. He’s not referring to online casino gaming though, he’s talking about the fact that crypto is often used to trade the currencies, instead of using them for their original design as an economic payment instrument. “As a form of investment, unbacked cryptos lack any intrinsic value. 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.” - Fabio Panetta. 

He also expressed concern for the various social and criminal consequences of an unregulated market, including large losses as a result of market manipulation, the ability to evade taxes, launder money, finance terrorism and circumvent sanctions. In his comments, Panetta discusses how he believes that change is needed to ensure that the crypto market is regulated and safe.

In his opinion, this means treating the entire crypto industry as a gambling activity, acknowledged by the unreliability and speculative nature of unbacked assets. He also suggests that the framework that is put in place should protect vulnerable consumers and investors. He suggests this can be done by using the same principles that guide the European Commission for online gambling laws, including taxing consumers in relation to the costs they impose on society.

The opinions given by Panetta are largely difficult to argue against. The whole point of crypto is that it is more secure than traditional methods of payment, but that security needs to extend down to the user to protect them from scams or fraudulent and criminal activities. However, there are many who will argue that regulation and centralization of crypto is just a way for governments to rake in more money via taxes. It would also affect two of crypto’s main unique selling points, which are super speedy and low cost transactions compared to traditional banking methods.

Overall, Panetta’s comments show that he believes that regulation is necessary to address what he feels are the significant social costs of cryptos and to build guardrails that address regulatory gaps and arbitrage. He urges regulators to resist what he calls “intense lobbying of the crypto industry” and to steer clear of poor regulation and legitimising “unsound” crypto models. Whether these comments will result in European countries actually putting regulation in place for cryptocurrencies remains to be seen, but there are certainly good arguments for and against it.