Central Bank chief says unbacked cryptocurrency 'is essentially a Ponzi scheme'

Reuters

The Central Bank governor has urged TDs to ban the advertising of crypto assets targeted at young adults, likening crypto not linked to any underlying assets to a Ponzi scheme.

A long-time critic of crypto assets, Gabriel Makhlouf said that while they presented minimal financial stability risk for now, the Irish regulator was very concerned about the impact on retail customers.

"There's a reasonable number of young adults who have put their money into crypto and there is an uncomfortable level of advertising that is targeted at that cohort. If you could find a way, I would recommend that adverts to that cohort are banned," Makhlouf told an Oireachtas committee on Wednesday.

"Unbacked crypto is essentially a Ponzi scheme... People who put their money into unbacked crypo, and most of the significant stock of crypto out there is unbacked, they are essentially gambling."

"When you gamble you can win, but most of the time when you gamble, you're actually losing."

Makhlouf, a member of the European Central Bank's governing council, said recently agreed EU regulations will provide much-needed "guardrails" for stablecoins – a type of crypto designed to hold a steady value – but that more regulation would likely be needed in the future.