After the Bank of England (BoE) in March, US Treasury Secretary Janet Yellen in early April, the ECB also asked on Monday to regulate crypto-assets, whose dynamics are such that they reach now larger market sizes. to the subprime mortgages that caused the last major financial crisis.
“We need to make a coordinated effort globally to bring cryptocurrencies into regulation,” ECB executive council member Fabio Panetta said in a speech in New York.
This call also echoes that of the Bank of England (BoE), which estimated in March that cryptocurrency regulation should be stepped up to prevent the growth of this sector from creating systemic risk. Based on data published by the Fidelity fund, the Bank of England estimates that in September 2021, 13% of US hedge funds and 23% of European hedge funds owned cryptocurrencies “, even though these are likely small investments, it said. specified.
A risk to the financial system
The growing demand for digital assets and instant payments has given rise to an ecosystem of cryptocurrency ‘miners’ and a host of intermediaries. Around bitcoin, the most famous cryptocurrency, the size of the cryptocurrency market “is now larger than the subprime mortgage market” when the latter “triggered the global financial crisis (of 2008) with a value of 1.3 trillion dollars” . , underlined Fabio Panetta.
These assets “generate instability and insecurity”, criticized the Italian banker.
For this “we must ensure that (these assets) are subject to standards in line with those applied to the financial system,” he added.
As such, the planet’s regulators must “move faster” to ensure crypto-assets “do not unleash an anarchic risk-taking frenzy” synonymous with “bubble”.
But regulation is not enough: “if the official sector – public bodies and intermediaries – does not satisfy” the strong demand for crypto, “others will intervene”, warned Fabio Panetta.
One digital euro and one dollar
He then asked central banks to engage in digital innovation, such as the ECB which launched its digital euro project. This innovation should allow citizens to use the single currency to make payments anywhere in the euro area.
In early April, US Treasury Secretary Janet Yellen insisted on tightening and adapting regulations in the face of cryptocurrencies, her ministry being hired by Joe Biden to work on creating a digital dollar.
“As banks and other traditional financial firms become increasingly involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new businesses,” he said in a speech at American University in Washington.
Janet Yellen also stressed that “new types of intermediaries (…) should be subject to appropriate forms of supervision”.
“When new technologies enable new businesses and new products and services, financial regulations must adapt,” added the Minister of Economy Joe Biden, saying that this should “be driven by the risks associated with the services provided to households and businesses. , not the underlying technology. ” .
The US president signed an executive order on March 9 asking the Treasury Department to report to him on the “future of money” within six months, thus initiating a lawsuit for a digital dollar.
The American central bank (Fed), which has been thinking about it for several years and published a report in January, the first phase of a public consultation, is for its part in charge of studying the phases to be implemented.
“Under the executive order, we will ensure that consumers, investors and businesses have adequate protections against fraud and theft, privacy and data breach and unfair and abusive practices,” assured Janet Yellen.
He also warned that “the financial innovation of the past has too often failed to benefit working families and sometimes exacerbated inequalities, giving rise to illicit financial risks and increased systemic financial risk.”
“We are now working with Congress to advance legislation to ensure that stablecoins are resistant to risks that could endanger consumers or the financial system in general,” explained the Minister of Economy. and Joe Biden’s Finance.
“We are also working closely with our international partners to promote consistent regulation and supervision across all jurisdictions,” he added. The eventual creation of a digital dollar “would take years to develop, not months”.
If successful, building the digital dollar could revolutionize global finance, over which the greenback reigns supreme.