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Expert Opinion on ECB Paper Regarding Cryptocurrency Regulations

  • Hansen opined that it’s within the jurisdiction of central banks to watch over its country’s fiat. 
  • Therefore, he divulged that the regulation of Decentralized Finance and more so cryptocurrency  is debatable.

A Cryptocurrency venture counsel at Presight Capital, Patrick Hansen has analyzed the European Central Bank document on cryptocurrency. Recently, the ECB released a document proposing an “all-comprehensive” regulation.

 Accordingly, the ECB intends to cover the crypto sector as much as it could in terms of regulation. The paper advised legislators within the area on how best to regulate the industry.

Notably, the paper conceded that the virtual asset sector is growing swiftly. The document indicated that if the trend continues without proper regulation, it will be dangerous. The ECB divulged that lack of regulation will see crypto trigger financial instability in Europe’s economy.

Should the Cryptocurrency Community be Regarded as a Sovereign State?

Therein, the paper focused on three integral sectors of the cryptocurrency industry. Namely, Stablecoins, Decentralized Finance (DeFi), and Climate risk of cryptocurrency. The European Central Bank indicated that the three sectors of the crypto space require urgent attention.

As analyzed by Hansen, firstly, the paper addresses the climate implication of cryptocurrency-related activities. It states that there is an option to either support the “crypto version of electric vehicle” or ban the fossil fuel type.

Noteworthy, this is about the PoW and the PoS consensus mechanism present in the crypto space. With emphasis, it addresses how Ethereum is about to migrate to the PoS. While Bitcoin still retains its operations on the PoW.

Additionally, the ECB opined that governments cannot neglect the situation. The papers reveal that regulators could ban mining, and place a carbon tax on cryptocurrency transactions or holding. The financial institution revealed that any of the aforementioned moves are reasonable. 

Also, the document discourses Decentralized finance with claims that most protocols are centralized. Subsequently, the Central Bank illustrated how Uniswap is under the control of developers, initial investors, and whales.

However, Hansen opined that it’s within the jurisdiction of central banks to watch over its country’s fiat. Therefore, he divulged that the regulation of Decentralized Finance is debatable.

The next stop focused on Stablecoin. A particular sector of the industry the European Central Bank has been seeking to repudiate since last year. With emphasis, this part focused on the demise of the Terra ecosystem.

Specifically, the document states that Stablecoins require urgent regulatory intervention to protect investors. Subsequently, this submission came along with the call for the adoption of the MiCA law by the European Union.

As submitted by the ECB, the collapse of UST indicates that stablecoins are nothing close to stable. According to the papers, this opinion is further fueled by the circumstances of how USDT lost its peg for a while.

So, Hansen asserted that the ECB didn’t draw a parallel line between stablecoins and fiats. He opined that the bank failed to admit how fiats are battling devaluation due to certain situations.

Rebecca Davidson Verified

Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”

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