European Central Bank executive board member Fabio Panetta said lawmakers across the world must decide how to regulate cryptocurrencies based on potential risks.

In a written statement for a speech to Columbia University on Monday, Panetta said global policymakers had made some progress in addressing regulatory frameworks on digital assets, but “not swiftly enough to keep pace with the emerging challenges.” According to the ECB official, the world needs crypto regulated based on anti-money laundering and countering the financing of terrorism rules of the Financial Action Task Force, strengthening public disclosure and reporting on regulatory compliance from the industry, and setting up “strict transparency requirements” and “standards of conduct.”

One of Panetta’s chief concerns seemed to be how the central bank and lawmakers address the taxation of cryptoassets, describing current requirements as “minimal” and “very difficult to identify tax-relevant activities.” The ECB official proposed taxing cryptoassets based on Proof-of-Work at a higher rate than other financial instruments based on “negative externalities that lead to sunk costs for society, such as high pollution.”

“We should bring taxation on crypto-assets into line with the taxation of other instruments and aim for alignment across jurisdictions, given the global nature of the crypto market,” said Panetta. “The introduction of reporting obligations for transactions above certain thresholds, as just recently proposed by the Organisation for Economic Co-operation and Development (OECD), would enhance transparency and combat tax evasion.”

Globally coordinated efforts are needed to bring crypto-assets into a regulatory framework, says Executive Board member Fabio Panetta at @Columbia. We must not repeat past mistakes by waiting for the bubble to burst before acting https://t.co/dGo0HV0KmL

1/5 pic.twitter.com/2MpmkmtoG4

— European Central Bank (@ecb) April 25, 2022

According to Panetta, Europe is “leading the way” in bringing cryptocurrencies into its regulatory purview, while the United States is working to supervise crypto service providers over perceived risks. He pointed to the Regulation of Markets in Crypto-Assets, or MiCA, as a step toward creating a “harmonised European approach” to crypto as well as the global authority Financial Stability Board cooperating with other financial regulators.

“We need to make coordinated efforts at the global level to bring crypto-assets into the regulatory purview. And we need to ensure that they are subject to standards in line with those applied to the financial system […] We should make faster progress if we want to ensure that crypto-assets do not trigger a lawless frenzy of risk-taking.”

Related: ECB executive board member talks about current state of digital euro CBDC research

The ECB has been working on the development of a central bank digital currency, with legislation on a digital euro expected in 2023. ECB president Christine Lagarde has previously hinted the central bank could roll out the digital currency by 2025.