Cryptocurrencies need regulation urgently, says ECB board member

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Cryptocurrencies need regulation urgently, says ECB board member

FRANKFURT Reuters - Cryptocurrencies are here to stay, so their regulation is urgently needed to protect investors and the stability of the global financial landscape, European Central Bank board member Fabio Panetta said on Wednesday.

The collapse of the FTX exchange, the crash of the stable coin TerraUSD and the decline ofBitcoin have caused a series of blows this year.

This is not just a bubble that is bursting. Panetta said in London that it is like a froth: multiple bubbles are bursting one after another. The fear of missing out seems to have morphed into a fear of not getting out. Unbacked assets are a form of financial gambling without a socially or economically useful function, so the task is to thwart criminal activity, protect unassuming investors and protect a financial system that may become increasingly intertwined withcryptocurrencies, Panetta said.

Panetta said stable coins are only stable in name, because they are supposed to keep their value through ties to a pool of assets.

Panetta said that these flaws are unlikely to spell the end of criptocurrencies. Gambling is perhaps the second oldest profession in the world. The link between the market and the financial system could be strengthened, especially if major tech companies enter the sector, meaning regulation is urgently needed, Panetta said.

The regulatory efforts should focus on preventing the use of crypto-assets to circumvent financial regulation and shielding the mainstream financial system from crypto risks, Panetta said.