Thomas Lyons 
The Central Bank of Ireland Governor, Gabriel Makhlouf, has issued a warning to investors amid the recent surge in the crypto market. Makhlouf cautioned that the lessons learned from the crypto crash of 2020 should not be forgotten, as it showcased the “many failures” of the crypto world. He specifically targeted unbacked assets and likened the purchase of products such as Bitcoin and Ethereum to buying a lottery ticket, stating that “you might win, but you probably won’t.” He further added that describing it as an “investment” is an abuse of the word and that “Ponzi schemes” might be a more accurate term.
The renewed warnings come as leading cryptocurrencies rebound following the market crash in the summer of 2020. Rising interest rates targeting inflation and the collapse of one of the world’s largest crypto exchanges, FTX, pushed many investors out of the market, disproving the notion that these assets were immune to cyclical trends. As inflation trends steadily lower, the Central Bank has extended several warnings in recent months in response to crypto’s growing popularity amongst individual investors, many of whom have been priced out of more traditional assets. The Central Bank has called out key risks such as misleading marketing, contagion, inefficient reserves, and an absence of consumer protection.
Moreover, Makhlouf also noted the rise of “aggressive advertising” from social media influencers paid to promote crypto without disclosing their own financial incentives. This follows a number of high-profile celebrities and social media stars being charged earlier this year by US regulators, including actress Lindsay Lohan, YouTuber and boxer Jake Paul, and singer Ne-Yo, for participating in an illegal crypto scheme after advertising digital assets without disclosing their own compensation for doing so. The role of social media personalities has been largely attributed to the market’s rebound, with recent volatility across the global banking sector also pushing investors into alternative markets.
Despite the heightened interest, the Central Bank has repeatedly warned of the lack of regulation throughout the sector. Makhlouf stated that “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 2020 still reverberates.” The Governor’s comments follow approval from the European Parliament last month of the Markets in Crypto Assets Regulation (MiCA), which, according to Makhlouf, “will put in place prudential and consumer requirements for the crypto sector across the EU.” While it will not be implemented until the start of 2025, the Central Bank governor welcomed the move, calling it “an important step in the regulation of crypto activities.”
In conclusion, it is essential to remember the lessons learned from the crypto crash of 2020. The surge in the crypto market should not be taken lightly, and investors should understand the risks involved before investing their money. The Central Bank’s repeated warnings of the lack of regulation in the sector emphasize the need for caution. The Markets in Crypto Assets Regulation (MiCA) will be an important step in regulating crypto activities across the EU, but until then, investors should exercise caution and do their due diligence.
