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Fiona Simmons January 26, 2023 2 min read
Irish Top Banking Official Likens Crypto to Gambling
The Governor of the Central Bank of Ireland, Gabriel Makhlouf, blasted cryptocurrencies, likening the to gambling and what is essentially a Ponzi scheme
Makhlouf did not entirely rule out cryptocurrencies as part of finance, but he warned that there should be certain safeguards and that consumers must approach this sector with a few caveats in mind.
Cryptocurrencies as Ponzi Schemes
The top Irish banker said that crypto that is not linked to any underlying asset is essentially a Ponzi scheme and noted that a growing number of advertisements was targeting young adults, which are the most likely group to buy into crypto companies and explore investment opportunities in the sector.
Makhlouf was not so much concerned about the fact that young adults participated in crypto – he characterized the current rates of participation as “normal,” and ruled out a significant financial stability risk for now. Still, the bank was worried about what the long-term implications could be, especially if advertisement continues to be pushed on young adults.
One of the suggested ways to reduce this risk is to ban crypto gambling advertisement that targets young adults, similar to how gambling companies are prohibited from targeting the same cohort. He also called the number of young adults who have put their money in crypto as “reasonable,” but that the advertisement had to go.
Makhlouf further elaborated on his reference to Ponzi schemes, comparing crypto to gambling, adding:
Unbacked crypto is essentially a Ponzi scheme. People who put their money into unbacked crypto, and most of the significant stock of crypto out there is unbacked, they are essentially gambling.Governor of the Central Bank of Ireland, Gabriel Makhlouf
When You Gamble, You Lose
The thing with gambling, the top banking official said, is that even though you can win, most of the time when you play, you will actually end up losing. This is precisely what the banker fears for many young adults caught in cryptocurrencies without properly understanding the industry or assessing the risk.
This is often due to the same aggressive advertisement he now wants to see gone, as they tend to mislead people and create unrealistic expectations from young people who choose to invest in crypto.
The collapse of several prominent companies, including FTX, Genesis, BlockFi, and others, should serve as a warning that the get-rich-fast story the crypto sector has been selling may be true, but it’s also gambling. Sometimes you win, but most of the time you lose.