Gabriel Makhlouf, the Governor of the Central Bank of Ireland, issued a warning to customers in Ireland that unbacked crypto assets may more correctly be classified as “Ponzi schemes” than as investments. Makhlouf issued a warning that the asset class “should be treated with a large dose of skepticism” and continues to be worried about the potential for damage to consumers.
He noted that the regulatory body is “open” to cryptocurrencies or digital tokens that are backed by another asset, such as physical cash; nonetheless, he emphasized that unbacked assets continue to present consumers with hazards.
In a blog post that was published by local Irish outlets, Makhlouf made the comparison between the purchase of such items with the purchase of a lottery ticket, stating that “you might win but you probably won’t.” He went on to say that calling it an “investment” is a misuse of the word, and that “Ponzi schemes” could be a better description of what’s going on.
The remarks of Makhlouf come only a few weeks after the European Parliament voted in favor of broad laws for crypto-asset markets. These regulations, which are collectively referred to as the Markets in Crypto Assets (MICA) regulation, are the world’s first complete set of regulations for issuing and trading crypto assets such as Bitcoin.
What next for ireland?
Even though Ireland’s exposure to the market is relatively limited at the moment, Makhlouf has indicated that cryptocurrencies are not going away anytime soon and that international cooperation is required to guarantee that they are regulated and overseen at a level that is proportional to the danger they bring.
The sector, which is keen for credibility and has experienced numerous high-profile scandals, notably the fall of Sam Bankman-Fried’s FTX crypto exchange last year, amid US fraud accusations and recriminations, is likely to express alarm in response to the Governor’s words. This is because the business is desperate for legitimacy and has encountered several high-profile scandals.
Despite this, the Irish government intends to promote Ireland as a location for blockchain firms, and it has given Irish Funds the responsibility of drafting a White Paper on crypto-assets and digital assets, which will report to the fintech steering committee that is part of the Department of Finance.