Digital Euro: Key to security in the crypto world!

Digital Euro: Key to security in the crypto world!

Fabio Panetta, a former European Central Bank (ECB) official and governor of the Bank of Italy, has highlighted the importance of a digital euro. In a recent annual report published by the Bank of Italy on May 30, Panetta emphasizes that the digital euro represents an essential tool to strengthen control over the risks of cryptocurrencies and ensure financial stability in the eurozone. He explains that it is necessary to advance the project of a central bank digital currency (CBDC) to meet the increasing demand for secure digital payments.

Panetta also warned that regulating cryptocurrencies alone is not enough to address systemic risks. He sees the digital euro as the key to solving these challenges. According to him, the Markets in Crypto-Assets (MiCA) regulation, which comes into force at the end of 2024, will not be sufficient. According to Panetta, few stablecoins have been issued in the EU since the regulation came into force, indicating low interest in issuance of crypto assets in Italy.

Important aspects of the MiCA regulation

The MiCA regulation aims to create risk-appropriate regulation and increase investor protection. Many of the regulations affecting asset-referenced cryptocurrencies and electronic money tokens (stablecoins) are expected to come into force in July 2024, while the majority of regulation will apply from early 2025. The European supervisory authorities, including the Federal Financial Supervisory Authority (BaFin), are preparing technical regulatory and implementing acts as well as guidelines.

Particular emphasis is placed on the need for crypto asset providers to provide a white paper containing key information about the issuer and the crypto asset. Explicit authorization is required for the public offering of e-money tokens and asset-referenced tokens. In addition, providers with more than 15 million active users must be viewed as significant providers and are therefore subject to increased supervision.

International cooperation and security for investors

Panetta highlights that MiCA offers European investors some protection, but not from risks from foreign platforms. He calls for greater international cooperation and emphasizes that the EU should take a leadership role in setting global regulatory standards. Importantly, only a central bank-backed digital euro can provide the necessary trust and functionality in the digital payments landscape.

The MiCA regulation also defines three categories of cryptoassets: e-money tokens, asset-referenced tokens and utility tokens. Common cryptocurrencies such as Bitcoin and Ethereum fall under this regulation, while security tokens and NFTs are generally not covered. A “black list” is also maintained in which providers who do not meet the MiCA requirements are listed.

Overall, Panetta's statements and the developments surrounding the MiCA regulation show that while cryptocurrency regulation is making progress, the need for a digital euro and strong international standards is becoming increasingly clear.

For more information see Cointelegraph and BaFin.