As the crypto space continues to grow, global regulators, including central banks, have been seeking to regulate their use. While some governments have been very crypto-friendly, the same cannot be said for Ireland and its central bank.
On May 5, the central bank of Ireland published a blog post on recent developments related to crypto regulation and steps the bank is taking to protect consumers from the risks posed by the burgeoning industry.
The bank’s governor, Gabriel Makhlouf, said the central bank would continue to exercise caution when it comes to the advantages and risks of crypto, regardless of the fact that Ireland’s exposure to the sector is already low. That said, the governor said the central bank makes a distinction between ‘backed crypto’ and ‘unbacked crypto,’ despite blasting Bitcoin (BTC) as a ‘Ponzi scheme’ rather than an investment.
However, the bank acknowledged the potential of ‘backed crypto,’ including solutions such as Electronic Money Tokens (EMTs) and Asset Reference Tokens (ARTs) under the EU’s new regulatory framework, “where appropriate reserves and controls are in place.”
Conversely, Makhlouf believes ‘unbacked crypto’ requires a significantly more careful approach. He likened purchasing unbacked cryptocurrencies to buying a lottery ticket, where ‘you might win, but you probably won’t.’
Ireland’s central bank welcomes EU’s MiCA legislation
The central bank applauded the recently approved Markets in Crypto Assets Regulation (MiCA) – the European Union’s (EU) most comprehensive crypto regulatory framework.
“I welcome this move. Although not due to be fully implemented in the EU until the start of 2025 – it’s an important step in the regulation of crypto activities.”
– Makhlouf said.
Ultimately, the governor concluded that the crypto market must be regulated like other financial markets, which is by imposing certain rules on the treatment of user funds, disclosures, risk management, governance, and information exchange.
