Mr. Gabriel Makhlouf:

At that level, essentially no. It is gambling.

As you move along the spectrum, you get into backed crypto, which also goes under the name of stablecoin, but which has not proved to be particularly stable at the moment. Among one of the big collapses was that of Terra last year. It was an algorithmic stablecoin that in the end did not work. You need to ask yourself what the point of this is. What is it trying to do? Unbacked crypto is essentially a Ponzi scheme. It is trying to attract people so that the first movers can take the money out of it at the right price. What some of these other stablecoins are trying to do is develop a private sector solution to modernise payments. I am generalising. However, they have some fundamental challenges. They are more vulnerable to runs, for example.

As you travel along the spectrum, you find underlying technology, which potentially has uses, although I remain sceptical about many of the assertions made about them. As one of my colleagues at the ECB said recently, blockchain cannot really work for the digital euro because it does not have the capacity and speed to deal with the millions of transactions it would need to deal with. I would not like to say the technology does not have its uses.

New EU legislation is coming in this year. The Markets in Crypto-Assets, MiCA, regulation will give us regulatory powers but it will not deal with unbacked crypto. It will deal with stablecoin. It is the start. There is a debate about whether regulating this stuff is giving it a badge it is not worthy of. My view is that we need some guard rails in the system and the new regulation will provide them. It will not be the end of the story. More will be needed. As regulators in the EU, the Central Bank and globally, we want to allow innovation to happen. Innovation in the financial system is important so you want to be careful about closing down all innovation. We also need to find a way to protect consumers. At the moment, that is the greatest vulnerability. In the grand scheme of things, there is minimal risk to financial stability. On the other hand, we have seen this sector grow, and grow rapidly. If it is unchecked, it will become a risk to financial stability so we need to get on the front foot.

There are some really serious issues in crypto. I am very concerned about the impact of unbacked crypto on individuals. I have not commented on the fact that some of that type of crypto also facilitates crime and other things. I know An Garda Síochána and others will probably be very much on top of that. Regulators need to get on top of this. This is a view that is shared across my peers around the world.