Ireland's Central Bank Governor Labels Unbacked Cryptos as Ponzi Schemes
Unbacked cryptocurrencies are more like a "Ponzi scheme" than an investment, argued Central Bank of Ireland Governor Gabriel Makhlouf - but adding that "crypto is not going away very soon."
In a Friday blog post, Makhlouf stated that Ireland's Central Bank differentiates between 'backed' and 'unbacked' crypto.
The bank remains "open towards the potential of 'backed crypto'," such as Electronic Money Tokens (EMTs) and Asset Reference Tokens (ARTs) under the Markets in Crypto Assets Regulation (MiCA).
However, the claimed benefits of 'unbacked' and poorly-backed crypto "should be treated with a large dose of scepticism". Buying these is like buying a lottery ticket, he said - while there is a possibility of a win, it is unlikely.
"And describing it as “investment” is, needless to say, an abuse of the word; “Ponzi schemes” might be more accurate," Makhlouf argued.
The Central Bank discourages the marketing of crypto to the public, he added, especially the aggressive advertising by influencers who do not disclose they're being paid to promote it.
The crypto winter and the events seen over the past year should not be forgotten, Makhlouf wrote.
These include the market crash(es), the falls of Terra/LUNA and FTX (among others), the subsequent contagions, an absence of consumer and investor protection, misleading advertising, inappropriate use of client assets, and insufficient quality of reserves.
"Firms 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 the crypto winter in 2022 still reverberates."
Notably, Makhlouf added, these very events and the "failures" in the industry have "ensured" that regulators, policymakers, and central
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