Mr. Gerry Cross:

These are hugely important and very difficult questions. I will start by talking about our approach to crypto in the round and then I will focus on energy. We published a warning last week, building on the work of the European supervisory authorities, on the real risks in crypto investment by retail. Mr. Makhlouf spoke to this because in many cases cryptocurrencies are unbacked and broadly speculative and that is matched with a remarkable level of promotional activity by influencers and celebrities, etc. It is truly a new phenomenon and there are real concerns about how that dynamic is playing out. On the other hand, when one looks at the underlying technology and functioning of something like Bitcoin, it is quite remarkable. There are potential advances and things might evolve in the next three, five or ten years to the good of the economy, the consumer and the user in smart contracts, for example. There is a significant potential benefit there. Our job is to try to manage the risks and at the same time try to allow the potential to develop. The Senator will have heard Mr. Makhlouf say that there are different type of crypto assets and different ways in which they operate. While they can be problematic, they are also opening up the financial services sector and market to a range of young consumers who previously would not have had that engagement or access. That raises questions around financial literacy and education and there is also a potential material positive in that space. Funds focused on the retail investors should not have crypto assets in them but we are more open to funds targeted at professional investors.

The Senator’s point on energy use is fundamentally important. It is really good to see that debate so live in the European Parliament in the context of the markets in crypto assets legislation which is currently under way and I am sure that debate will remain live as it goes through the trilogue discussion between the European Parliament and the European Council. Wherever that comes out, the deal that will likely be done there means this will be firmly on the agenda. Until now it has been right to say that the energy consumption issue has not been properly on the agenda and it needs to be. I could not agree with the Senator more on that. I talked about the underlying technology and it is interesting that already we see these products move from proof of work, which is highly energy intensive, to proof of stake, which is another type of verification mechanism. We are already seeing the evolution of these products to respond to those challenges. I am not sure I am giving the Senator the clarity she might like but we see the risks in this space. We are also conscious of the potential benefits.

We are also very conscious that Ireland is seen as a jurisdiction where those interested in providing services for crypto assets will be interested in locating themselves. We are seeing that come through, for example, with some of the registration processes around virtual assets service providers. There is a lot going on in this space and it is right to say that we need to focus on the risks while at the same time trying to put in place the things that will allow the benefits to be realised.