European Central Bank Executive Board member Fabio Panetta compared cryptocurrencies to a pyramid scheme and predicted an imminent collapse in the value of digital assets.
As with pyramid schemes, the positive dynamics [of virtual currency prices] will continue as long as a growing number of investors believe in further appreciation and asset values that are not backed by income or guarantees. When investor enthusiasm evaporates, the bubble will burst,” Panetta said.
According to Fabio, cryptocurrencies threaten the financial stability of the European Union for three reasons.
First, the dumping of digital assets will provoke a drop in the value of stocks. Second, the ruin of cryptoinvestors will cause a domino effect in traditional financial markets. Third, the disappointment of people who have invested in virtual currencies will lead to a reduction in demand for other investment instruments.
To avoid these problems, Panetta recommends tightening control over cryptocurrencies without waiting for a collapse. He therefore urges lawmakers to approve stricter regulation of the sale of digital assets in response to the increased demand for tokens and coins.