The head of the Central Bank of Ireland compared cryptocurrencies with a “Ponzi scheme”

The head of the Central Bank of Ireland compared cryptocurrencies with a “Ponzi scheme”

Unsecured digital assets are more like a “Ponzi scheme than an investment” and create risks from which consumers must be protected. This was announced by the Governor of the Central Bank of Ireland, Gabriel Makhlouf, writes forklog.

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What the banker says

In his opinion, there is an “urgent need for political action” to achieve a “tough” regulatory regime for the preservation of citizens’ financial security.

“The regulatory regime, which properly protects the market from fraud, manipulation and money laundering, as well as ensures financial stability, is an important next step. As authorities, we must ensure equal conditions for business in the EU and consumer protection,” Makhlouf wrote.

He added that the Irish Central Bank distinguishes between secured and unsecured cryptocurrency. The agency is “open to the potential” of the first, but is skeptical about the second, the official explained.

Read: What the “legend of swindlers” Bern Madoff taught every investor

Makhlouf believes that unsecured digital assets are not properly regulated, and their purchase can lead to serious losses.

“Investing in similar products is like buying a lottery ticket: you might win, but you’re unlikely to win. Therefore, it should not be called investments. “Ponzi scheme” gives a more accurate definition of cryptocurrencies,” he said.

As a reminder, on April 20, the European Parliament approved a draft law on the regulation of the MiCA crypto-asset market. The new rules will enter into force in 2024.

In March, ex-Minister of Finance of Belgium and current member of the European Parliament Johan van Overtveldt called on the authorities to ban cryptocurrencies against the background of the banking crisis.

What is a Ponzi scheme?

A Ponzi scheme is a financial pyramid. This scheme got its name in economic theory in honor of the person who first came up with the idea of ​​creating a fraudulent scheme. He was Charles Ponzi, an American immigrant from Italy.

Signs of a Ponzi scheme

  • Guarantees of profitability several times higher than the average for bank deposits, OFZ and “blue chips”;

  • A short life span — months, less often — years. Payments to old depositors occur exclusively at the expense of new funds, which means that this simply cannot continue for long. The first slightest doubts about the financial stability of the scheme on their part and the handling of their deposits, as a rule, instantly collapse everything. You can stay in the winning position only if you correctly guess the moment and come out with their schemes in advance;

  • An aggressive advertising campaign, sometimes with bonuses for attracting new clients from among friends and relatives;

  • Absence of reporting or the most vague explanations of what the company actually invests in and how it gets such high profitability.

Source: Ministry of Finance

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