Central Bank of Ireland governor Gabriel Makhlouf has compared cryptocurrencies to "ponzi schemes" and says there is "urgent need" for policy action to protect consumers.
In a blog, the governor says that while the Bank is "open" towards the potential of ‘backed crypto’ - such as Electronic Money Tokens and Asset Reference Tokens - unbacked crypto is a "very different proposition".
Writes Makhlouf: "My view is that the claimed benefits of ‘unbacked crypto’ should be treated with a large dose of scepticism. The purchase of such products can be similar to purchasing a lottery ticket: you might win but you probably won’t. And describing it as 'investment' is, needless to say, an abuse of the word; 'Ponzi schemes' might be more accurate."
Makhlouf welcomes the Markets in Crypto-Assets (MiCA) crypto licensing regulations which have recently been voted through the European Parliament as an "important step", although he notes the rules will not be fully implemented until the start of 2025.
He writes: "The reality of course is that crypto is not going away very soon and the nature of the product means international co-ordination is needed to ensure it is regulated and supervised at a level commensurate to the risk it poses.
"The crypto market should be treated no differently to other financial markets with similar rules on the treatment of client funds, and on disclosures, governance, risk management and information exchange."