all about cryptop referances
A new report from the European Central Bank (ECB), presented as a “deep dive into cryptocurrency risks”, calls for “appropriate” regulation and supervision of stable currencies and decentralized finance (defi). It also addresses the hot topic of Bitcoin’s carbon footprint in Europe, and suggests that a ban on mining with evidence of work is likely.
Crypto-related financial risks, especially those related to stablecoins and defi platforms, as well as the threat to climate change targets due to energy-intensive methods of crypto mining, are the focus of the latest edition of the Macroprudential Bulletin issued by the European Central Bank (ECB). Key points in the report published in July were highlighted this week by Patrick Hansen, advisor for cryptocurrencies at Presight Capital.
The authors of the article examine the political implications of these segments of the crypto market, and insist that the growth and increasing use of stack coins around the world require immediate implementation of necessary regulatory, supervisory and supervisory frameworks, such as MiCA legislation, before the Link between these digital currencies and the traditional financial system are getting even deeper.
The ECB experts recognize the important role of stablecoins for the cryptoecosystem in one of the three articles in the bulletin, and point out that their critical function may have contagious effects on the financial system if unsupported cryptocurrencies pose a risk to financial stability in the future. They recall May’s collapse of terrausd (UST) algorithmic stablecoin, and comment:
Recent developments show that stablecoins are anything but stable, as exemplified by the crash of terrausd and the temporary de-pegging of tjor.
Initially it functioned mainly as a “relatively secure” car park “, and the use cases for stablecoins have multiplied in recent years, notes the eurozone monetary authority, even more so with the rise of defi applications, which represent another rapidly growing segment of the crypto market. especially the last year.
While the ECB recognizes that defi platforms use technology-enabled innovation and differ in certain aspects such as how assets are held, trust generated and systems managed, the ECB claims that they do not create new financial products, but rather mimic those offered by traditional financial providers. At the same time, “defi is in many ways subject to the same vulnerabilities as traditional finance,” says the central bank and elaborates:
Defi-protocols or platforms claim to have a decentralized management structure, although in reality the management is often concentrated.
The ECB believes that efforts are needed to regulate and monitor the defio area effectively, despite the challenges posed by its decentralized and anonymous nature, which makes the task more difficult for decision-makers and respective authorities. The European Central Bank calls for a coordinated approach at international level and common standards for identifying and filling regulatory gaps.
The ECB’s Macroprudential Bulletin comes as the EU moves towards adopting and implementing the comprehensive MiCA regulatory package. Central EU institutions recently agreed on the legislation. A controversial proposal to ban the provision of cryptocurrency services using power-intensive proof-of-work (PoW) mining was dropped from the draft.
Members of the crypto industry and society had warned that such a move would have constituted a ban on Bitcoin. But the ECB article raises the question “Is climate risk priced into cryptocurrencies?” argues that governments can stimulate proof-of-stake (PoS) consensus mechanisms, described as the “crypto version of the electric vehicle”, and restrict or ban the PoW mechanisms, referred to as the “crypto version of the fossil car.”
“So while a hands-off approach from government agencies is possible, it is highly unlikely, and government policy actions (such as disclosure requirements, carbon tax on cryptocurrencies or holdings, or a direct ban on mining) are likely,” the authors said. Think that. In their view, it is also unlikely that the EU will limit or ban fossil fuel cars by 2035, but will not take action against cryptocurrencies with their carbon emissions, which they say are enough to offset most eurozone countries’ savings on greenhouse gas emissions.
Do you think the EU will impose strict rules on cryptocurrencies and ban bitcoin mining? Share your expectations in the comments section below.
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