The European Central Bank (ECB) has emphasized the need for comprehensive Decentralized Autonomous Organizations (DAOs) regulations, according to an occasional paper. Market Infrastructure Expert Payments at ECB, Ellen Naudts, authored the paper, which underscored the urgency of addressing DAO technology that has outpaced existing regulatory frameworks.
The paper warned of unique risks DAOs present to the financial ecosystem's safety and growth. It stressed that current registration frameworks, rooted in traditional pen-and-paper era methods, are ill-equipped to handle these emerging risks. The lack of global regulation to address such issues could limit DAOs' role in future finance and pose a significant threat to financial stability.
Simultaneously, an unidentified ECB official criticized cryptocurrency, labeling it as 'deleterious.' The official's comments are part of broader discussions within the ECB about the increasing role of digital currencies and their potential impact on consumer protection and the smooth operation of payment and securities systems.
On the other hand, ECB board member Fabio Panetta has been advocating for the digital euro initiative. He believes this move could position Europe at the forefront of advanced economies. Panetta supports the European Commission's legislative proposals for a digital euro, arguing that it would secure Europeans' access to a public payment option as 'closed-loop solutions' become more prevalent in private services.
The paper also introduced the concept of a digital euro, a proposed Central Bank Digital Currency (CBDC) that could coexist with Decentralized Finance (DeFi) solutions like DAOs, provided they comply with regulatory standards. The discussions also highlighted the potential of zero-knowledge proofs beyond cryptocurrency and underscored the importance of safeguarding privacy in the digital sphere.
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