A top ECB official is urging a global crackdown on the crypto market to prevent a 'lawless frenzy'

• A top ECB official urged globally coordinated measures to regulate crypto and avoid a "lawless frenzy".
• Fabio Panetta supported higher taxation for some crypto and called for oversight on peer-to-peer payments.

A top ECB official called for international coordination to regulate the crypto sector and called for a crackdown on the market.

Fabio Panetta said the unregulated crypto market posed financial stability risks and policymakers should not leave it unchecked.

"Now is the time to ensure that crypto-assets are only used within clear, regulated boundaries," he said in a speech at Columbia University on Monday. "We should make faster progress if we want to ensure that crypto-assets do not trigger a lawless frenzy of risk-taking."

"But our measures can only be effective if they are matched by ambitious measures implemented by our international peers," he said.

Panetta suggested holding crypto to the same standards as other financial assets, and proposed bringing peer-to-peer crypto transfers under the scope of rules on anti-money laundering and countering the financing of terrorism. Panetta warned crypto-assets could be used for tax evasion or to circumvent sanctions.

He also said taxation for crypto should be in line with other instruments and across jurisdictions and said there should be an obligation to report transactions above a certain threshold. He raised the possibility of higher taxation for some crypto assets, like those based on PoW (proof of work), such as bitcoin, which tend to be more energy-intensive. Panetta urged regulating on-chain peer-to-peer payments due to the risk of them evading regulation.

Panetta said greater disclosure and transparency requirements for the crypto market would ultimately lead to greater consumer protection. He said crypto's volatility and liquidity meant that a standard of conduct should be followed by professional crypto operators to protect retail investors.

"We need globally coordinated regulatory action to address issues such as the use of crypto-assets in cross-border illicit activities or their environmental footprint," he said.

Panetta compared crypto's unregulated nature to the Wild West and to the subprime mortgage market that led to the 2008 global financial crisis.

"In the absence of adequate controls, crypto-assets are driving speculation by promising fast and high returns and exploiting regulatory loopholes that leave investors without protection," he said.

His concerns echoed the IMF's. In its Global Financial Stability Report last week, the International Monetary Fund urged policymakers to develop comprehensive global standards for crypto assets and to coordinate their regulatory approach with others around the world.