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The ECB needs “globally coordinated regulatory action” on crypto, an official says

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European Central Bank board member Fabio Panetta said lawmakers around the world need to decide how to regulate cryptocurrencies based on potential risks.

In a written statement for a speech at Columbia University on Monday, Panetta said global policymakers have made some progress in addressing the regulatory framework for digital assets, but “not fast enough to keep up with emerging challenges.” . ECB official says world needs cryptocurrencies regulated under Financial Action Task Force rules to combat money laundering and terrorist financing, strengthen public disclosure and reporting of industry compliance, and “strict transparency requirements” set up” and “behavioural standards”.

One of Panetta’s main concerns seemed to be how the central bank and legislators deal with cryptoasset taxation, describing the current requirements as “minimal” and “very difficult to identify tax-related activities.” The ECB official suggested taxing proof-of-work-based crypto assets at a higher rate than other financial instruments based on “negative externalities that result in sunk costs to society, such as B. High pollution”.

“We should harmonize the taxation of crypto assets with the taxation of other instruments and strive for alignment between jurisdictions given the global nature of the crypto market,” Panetta said. “Introducing reporting requirements for transactions above certain thresholds, as recently proposed by the Organization for Economic Co-operation and Development (OECD), would increase transparency and combat tax evasion.”

According to Panetta, Europe is “leading the way” in bringing cryptocurrencies under its regulatory purview, while the United States is working to monitor crypto service providers over perceived risks. He pointed to the regulation of crypto asset markets, or MiCA, as a step towards creating a “harmonized European approach” to crypto, as well as the global Financial Stability Board, which works with other financial regulators.

“We need a coordinated effort on a global scale to bring crypto assets into the regulatory arena. And we must ensure that they are subject to standards that match those of the financial system […] We should move faster if we want to ensure that crypto assets don’t incite lawless frenzy of risk taking.”

Related: ECB Executive Board member gives update on Euro-CBDC digital research

The ECB has been working on the development of a central bank digital currency, with legislation on a digital euro expected in 2023. ECB President Christine Lagarde has previously hinted that the central bank could launch the digital currency by 2025.