Unbacked Cryptocurrency Is More Like A “Ponzi Scheme” Than An Investment, Argued Central Bank of Ireland Governor Gabriel Makhlouf — but adding that “crypto isn’t going away anytime soon.”
In Friday’s blog post, Makhlouf where did it go He IrelandThe Central Bank makes a distinction between ‘backed’ and ‘unbacked’ crypto.
The market remains open to the potential for bank “backed crypto” such as Electronic Money Tokens (EMTs) and Asset Reference Tokens (ARTs) under the Crypto Assets Regulation (MiCA).
However, the claimed benefits of ‘unbacked’ and poorly-supported crypto “should be regarded with a substantial dose of scepticism”. Buying them is like buying a lottery ticket, he said – there is a possibility of winning, but not a chance.
“And to describe it as an “investment” is, needless to say, a misuse of the word;” Ponzi schemes “may be more accurate,” Makhlouf argued.
The central bank discourages the marketing of crypto to the public, he said, especially aggressive advertising by influencers who do not disclose that they are being paid to promote it.
eye of the regulator
Not to forget the crypto winter and the events we have seen over the past year,” Makhlouf wrote.
These include market crash(es), decline of Terra / Luna And ftx (among others), post-transitions, lack of consumer and investor protections, misleading advertising, improper use of customer assets, and inadequate quality of reserves.
“Companies operate without regulatory oversight and it is clear that some of them chose to operate with little thought for consumers or investors. What began as a crypto winter in 2022 is still changing.”
Notably, Makhlouf said, these events and “failures” in the industry have “ensure” that regulators, policy makers and central banks all focus on discussing crypto and its role in the financial system.
European Parliament recently approved mica, The new regulatory framework covers a range of issues within the crypto sector and affects exchanges, custody providers, investment advisors, stablecoin issuers and other entities. European Union market.
“Although not due to be fully implemented in the EU until early 2025 – this is an important step forward in the regulation of crypto activities,” Makhlouf said.
crypto isn’t going away
However, the governor described that as “a real step forward”. central banks want to use technological innovations.
For example he Bank of International Settlements ,bis) Innovation hub Eurosystem Center, where projects work on “compliant use” of decentralized finance (DeFi) tool, blockchainAnd smart contract,
The Central Bank of Ireland has a strong focus on technological innovation, “recognizing that we are at a moment of significant technological change,” he said, adding that any change comes with risks and benefits.
The reality of course is that crypto is not going away anytime soon and the nature of the product means that international co-ordination is needed to ensure that it is regulated and supervised at a level commensurate with the risk.
Makhlouf concluded that the crypto market should be treated as other financial markets, with the same rules on client fund treatment, disclosure, governance, risk management and information exchange.
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learn more:
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