The ECB considers the Bitcoin ban to curb environmental damage
Fabio Panetta, a member of the European Central Bank’s executive board, said the bank is “seriously considering” a Bitcoin ban (including other cryptocurrencies) because of the environmental damage they can cause.
He also said the ECB is looking at a tax on digital assets to discourage use and reduce environmental damage. Panetta’s comments in his speech at the London School of Economics came amid a growing debate about the sustainability of cryptocurrencies, which typically require high levels of electricity to mine and process transactions.
Panetta also took the opportunity to confirm the ECB’s call for the creation of a digital euro. According to him, only a central bank digital currency can provide a solid foundation for the wider digital financial ecosystem required to harness the opportunities of digital technologies
ECB considers tax imposed on digital assets
Environmental activists have called for a ban on Bitcoin and other digital tokens, arguing that their large energy needs harm the environment. Panetta noted that the ECB is also looking at other potential measures to address the issue, including “a regulatory framework for digital currencies that can be used for payment services,” as well as “a more comprehensive approach to reducing the environmental impact of digital currencies.”
He added that the ECB was also considering “a tax on digital assets that could be used to finance environmental projects”.
The comments come a month after Panetta’s boss, ECB President Christine Lagarde, warned that the EU needed to take a unified approach to cryptocurrencies. “We must be vigilant and use all of our regulatory tools to prevent the risks posed by cryptoassets,” Panetta said. “This includes the possibility of outright bans in certain cases, either temporarily or permanently, or the introduction of a European tax on certain crypto-assets.”
Bitcoin ban imminent?
The European Commission is currently considering introducing a “digital finance package” that would impose new rules on cryptoassets and the exchanges that trade them, as well as digital payments and crowdfunding platforms.
The idea of a European tax on cryptocurrencies has been mooted before, with German Finance Minister Olaf Scholz calling for a 5 percent tax on digital assets in November 2020. However, the proposal has not gained much traction and is unlikely to be implemented anytime soon. future.
Panetta’s comments show that the ECB takes the issue of cryptocurrency seriously, and is willing to take drastic steps to protect consumers and the financial system.
According to the Fabia FTX exchange, which allegedly stole up to $10 billion from its clients to hide the losses of a sister trading firm, there is enough evidence that “finance cannot be trustless and stable at the same time.”
Ethereum addresses environmental concerns with Proof of Stake
As a result of widespread concern about the sustainability of cryptocurrencies, some studies claim that Bitcoin’s energy consumption is equivalent to entire small countries. Ethereum addressed this concern by switching to Proof of Stake, which is more energy efficient. Proof of Stake is a consensus algorithm that is more energy efficient than Proof of Work, the algorithm used by Bitcoin.
Proof of Stake does not require the same amount of energy to validate transactions, making it more sustainable. In addition, proof of stake encourages users to keep their tokens instead of trading them, creating a more stable price. This makes it a better choice for many cryptocurrency investors
According to Panetta, the EU should “tax cryptoassets based on their social costs,” which include “the high energy and environmental costs” associated with some cryptomining and validation activities.