A new report by the European Central Bank (ECB), presented as “Details of Cryptocurrency Financial Risk,” calls for “appropriate” regulation and oversight of stablecoin and decentralized finance (defi). It also addresses the hot topic of Bitcoin’s carbon footprint in Europe, suggesting that proof of work mining may be banned.
According to the ECB, stablecoin growth, decentralized warrant regulation and supervision
The European Central Bank (ECB) is a threat to crypto-related financial risks, especially those associated with Stablecoin and the decentralized platform, and to climate change targets blamed for energy-intensive crypto-mining methods. An important moment in the report published in July Highlighting This week is by Patrick Hansen, Cryptographic Venture Advisor at Presence Capital.
Investigating the impact of these segments of the crypto market on policies, the author of the paper wrote that the growth and use of stablecoin around the world requires a framework of regulation, supervision, and surveillance, such as the MiCA Act. It claims that immediate implementation of the work is needed. The interconnection between these digital currencies and traditional financial systems will be further enhanced.
Recognizing the important role of stable coins in the crypto ecosystem in one of the three bulletin articles, ECB experts said that if unsubstantiated crypto assets pose a risk to financial stability, they are important. Point out that the function can have a contagious effect on the financial system in the future. Recalling the collapse of Stablecoin in the Terrausd (UST) algorithm in May, they comment:
Recent developments have shown that stablecoin is not stable, with terrausd crashes and temporary tether unpegging.
Initially functioning primarily as a “relatively safe” parking space “”, the use cases of stablecoin have increased in recent years, and eurozone financial authorities have expanded another rapidly in cryptography. This is even more so with the rise of decentralized applications that represent the segments that have been in the market, especially over the past year.
The ECB may create new financial products, acknowledging that the decentralized platform employs technology-enabled innovations that differ in certain aspects such as how assets are held, how trust is generated, and how systems are managed. Instead, it claims to mimic the products offered by traditional financial providers. At the same time, “defi is subject to the same vulnerabilities as traditional finance in many respects,” the central bank details.
Defi protocols or platforms claim to have a decentralized governance structure, but in practice governance is often centralized.
The ECB believes that despite the challenges posed by decentralized and anonymity, efforts are needed to effectively regulate and supervise the decentralized space, which makes it difficult for policy makers and their respective authorities. I am. The European Central Bank is seeking a coordinated approach and common standards at the international level to identify and close regulatory gaps.
Proof of work mining ban
The ECB’s Macroprudential Bulletin will be announced as the European Union advances towards the adoption and implementation of a comprehensive MiCA regulatory package. Major EU agencies have recently reached an agreement on the law. The controversial proposal to ban the provision of services to cryptocurrencies using power-intensive Proof of Work (PoW) mining has been removed from the draft.
Members of the crypto industry and community have warned that such measures correspond to a Bitcoin ban. But an ECB article asking the question, “Is climate risk priced on crypto assets?” Authorities argue that they can encourage a proof-of-stake (PoS) consensus mechanism called the “encrypted version of electric vehicles” and limit or ban the PoW mechanism called the “encrypted version of fossil fuel vehicles.” “
“Therefore, a public agency hand-delivery approach is possible, but it is very unlikely, with policy measures by the authorities (eg disclosure requirements, carbon taxes on crypto transactions or holdings, or a complete ban on the mining industry). That’s right, “says the author. think. In their opinion, the EU is unlikely to limit or ban fossil fuel vehicles by 2035, but they say carbon is sufficient to counteract greenhouse gas emission cuts in most eurozone countries. Emissions will take no action against crypto assets.
Do you think the EU will introduce strict regulations on crypto assets and ban Bitcoin mining? Share your expectations in the comments section below.
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