Ponzi Scheme: The Risks of Unbacked Cryptocurrency

Gabriel Makhlouf, Governor of the Central Bank of Ireland, has stated that unbacked crypto may be deemed a “Ponzi scheme” in a new blog post examining the risks posed by the digital currency sector. Makhlouf cautioned investors against unbacked crypto purchases, stating that description of it as “investment” was an “abuse of the word.” He did, however, draw a distinction between backed and unbacked crypto and stated that the bank would be receptive to the former. He also highlighted the need for European states to adopt policy actions to safeguard consumer protection. Makhlouf’s comments came amidst a wave of regulatory warnings across the world, with central banks and financial regulators reprimanding the crypto industry for its lack of security.