Mr. Gabriel Makhlouf:

The first important point to make and bear in mind is that we are not lowering our standards. That is an important piece of background. To be clear, we are not supportive of crypto, particularly the unbacked crypto I explained earlier, and we are not looking to encourage it. It is not going to be regulated by any EU regulation. As I stated earlier, I am concerned about the implications for retail customers. I am less concerned about the implications for financial stability, but that does not mean we should ignore it. Regulators across the world are concerned about the whole crypto universe but unbacked crypto in particular. I am happy to repeat that I consider unbacked crypto to be, in essence, a Ponzi scheme. It is problematic and a gamble. People are free to gamble. I reiterate that some people will win when they gamble but most people will lose. The Central Bank is not in the business of promoting, supporting, authorising or encouraging unbacked crypto. I hope that is clear.

Second, the substance of the article to which the Senator referred, which I have read, is about our authorisation processes which have been in place for some time. In a nutshell, they are processes through which firms must go if they wish to operate in Ireland. We have looked at the way the process has run and we have made efficiency and effectiveness improvements to streamline the process. That does not mean we have reduced our standards. Our standards have not reduced; they have just become more transparent and, it is to be hoped, a little faster. This is not to promote or encourage crypto; it is basically to run an efficient operation that achieves its outcomes, which are to only authorise the firms that meet our requirements and not to spend a disproportionate amount of resource on that so that we can use those resources to do other things to protect consumers and ensure the financial system operates for the whole country.

The Central Bank does not have a mandate to promote innovation; it has a mandate to ensure monetary and financial stability and that the financial system works for consumers and the whole economy. The reality is the financial system is changing. It has changed, is changing and will change. What the Central Bank cannot do is ignore that change because, if we do, ultimately we will cause a problem for the country. We have to understand what is happening in those changes. We are doing that partly by making sure our people are skilled up to understand what is happening, particularly in technology. One of the best ways of understanding what is going on is to speak to the industry about what it is doing and what is happening. That is how we learn. It is one of the key ways of learning. The innovation hub that we have had in place for a number of years is a place where people with new ideas can engage. To be clear, fintechs are not crypto. We are talking about firms that are offering different sorts of services but not the crypto stuff or unbacked crypto. These products are being developed and firms want to provide them in Ireland. Some of them are Irish firms. To get that authorisation, they have to go through a process. Our innovation hub has acted as the gateway to help people to understand our rules. It is critical that people understand the standards we expect. We had a lot of complaints in the past that people did not understand our rules and, when they put in their authorisations, we either rejected them or spent a long time trying to understand them. The sort of improvement we have made, which the article appears to recognise, is that our teams that work in this area have found ways of improving their processes while ensuring that people understand our standards.

Finally, on the European legislation that is coming, new legislation is normally introduced by the European Commission. The Department of Finance is the lead agency that manages proposed legislation by the European Commission. We support the Department in its negotiations in those European forums. Other rules are made in the supervisory authorities, such as the European Banking Authority, the securities authority and so on, in which we are directly involved. I hope that is helpful.