ECB’s Panetta Warns of Risks of Unbacked Crypto-Assets

6 May 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Fabio Panetta on Tuesday highlighted the risks associated with unbacked crypto-assets but said that stablecoins suffered from too many flaws to offer a solution to payment system deficiencies.

In a keynote speech at the Asian Development Bank 58th Annual Meeting in Milan, Panetta, who heads Banca d’Italia, said that inefficiencies to which cross-border payments were subject had led to new products like crypto-assets ‘in order to provide a better solution to people’s payment needs.’

This promise, however, warranted being taken ‘with a large pinch of salt’, he said. End users of unbacked crypto-assets could face high losses, and such assets were not fully fledged forms of payments because of their volatility, lack of inherent worth and insufficiently regulated nature, he said.

‘If properly designed and regulated, so-called stablecoins could instead perform some payment functions’, he said. ‘However, the proliferation of stablecoins running on non-interoperable blockchains risks fragmenting the payments landscape and undermining overall efficiency.’

Moreover, he criticized, regulation of stablecoins was highly inconsistent from one jurisdiction to the next, and failure to coordinate across jurisdictions made for an uncertain future, he said.

‘Finally, while stablecoins face the risk of a “run” like banks, they typically lack some critical safeguards such as access to central bank facilities, deposit insurance, and resolution frameworks’, he said.

‘Prohibition is not the answer, though’, he continued. ‘The only effective response to the emergence of riskier alternatives is to provide retail payment solutions that are equally efficient, but safer and more reliable.’