Governor of the Central Bank of Ireland Calls Cryptocurrencies a Ponzi Scheme

Cryptocurrencies in the sights of Ireland

Gabriel Makhlouf, Governor of the Central Bank of Irelandreleased a statement aimed at expanding on its approach to the cryptocurrency industry and determining how it could be framed to better protect investors.

Based on the “crypto winter” of 2022, littered with events that are extremely difficult to digest for the ecosystem, but also for its image (particularly FTX and Terra), the governor highlighted the risks associated with this marketmentioning “ lack of consumer protection, aggressive and misleading advertising, risk of contagion, inappropriate use of client assets and insufficient quality of certain cryptocurrency reserves “.

According to Gabriel Makhlouf, the Irish population is only relatively exposed to cryptocurrencies, but the resulting risks would be sufficient to encourage stricter supervision on a global scale. As such, he welcomed the arrival of the MiCA regulation, whose implementation on the market is expected for 2025. It will also be the first regulation concerning cryptocurrencies thought out on such a large scale.

Drawing a parallel with the “classic” financial market, the Governor of the Central Bank of Ireland said that due to its great growth, the cryptocurrency market must also be structured in a way that safeguards crypto platform client funds.

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Safer stablecoins?

According to the press release, the Central Bank of Ireland would not be closed to technological innovation, and would even attach “great importance” to it. As such, the governor called decentralized finance (DeFi) tools such as blockchain and smart contracts a “step forward”in particular insofar as the latter made it possible to facilitate access to financing for small and medium-sized enterprises.

Gabriel Makhlouf also insisted on underlining the difference between ” backed cryptocurrencies ” And ” unbacked cryptocurrencies », where backed means “stablecoin backed by at least an equivalent reserve in fiat currency”. According to him, the latter are safer when “ appropriate checks are put in place to ensure the reserves in question.

And conversely, “unsecured” cryptocurrencies, i.e. those that are not stablecoins (including Bitcoin (BTC) and Ether (ETH)), are they called a “lottery ticket” and a “Ponzi scheme” because of their volatility :

“Buying such products can be like buying a lottery ticket: you may win, but you probably won’t. And calling them an “investment” is, of course, a misnomer; “Ponzi scheme” would be fairer. The Central Bank remains concerned about the risk of harm to consumers and, in particular, discourages the marketing of cryptocurrencies to the public. »

Governor’s statements directly echo the concerns expressed by the various central banks around the worldin particular by the European Central Bank, the Bank of England or even by the Federal Reserve of the United States (Fed).

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Source: Bloomberg

Passionate about the world of decentralized finance and the novelties brought by Web 3.0, I write articles for Cryptoast to help make blockchain more accessible to everyone. Convinced that cryptocurrencies will change the future very soon.

Maximilien Prue

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