The growing popularity of cryptocurrencies such as Bitcoin is “of great concern,” according to Derville Rowland, one of Ireland’s senior central bank officials.
âCrypto assets are a pretty speculative and unregulated investment,â and people should be âreally aware that they could lose all of that investment,â the central bank’s chief financial officer said in an interview. .
Rowland, whose department of Ireland’s central bank is known to have imposed heavy fines on some of the country’s largest financial firms, joins a host of central bankers who have sounded the alarm on crypto investments.
Bank of England Governor Andrew Bailey has warned that cryptocurrencies have no intrinsic value and people should only buy them if they are willing to lose their money. Last week, Bank of Japan Governor Haruhiko Kuroda added his voice to the chorus of concerns, noting Bitcoin’s “extraordinarily high” volatility. Bitcoin has grown by around 30% since the start of the year.
Rowland is a formidable regulatory voice. In July, she will take over the chairmanship of the Standing Committee on Investment Management of the European Securities and Markets Authority (ESMA), the group that helps prepare fund industry regulation.
Its rise has been the face of the Irish central bank’s execution investigations. The regulator recently fined or investigated most Irish retail banks for overcharging mortgage loans. In March, he fined Davy, the country’s largest securities firm, for violations that ultimately resulted in the CEO and other executives resigning. This business is now for sale following the spinoff. Rowland said at the time that Davy “just had to look at himself in the mirror” when “he wondered how things turned out so catastrophically.”
Cryptocurrencies aren’t the only digital investments causing regulatory discomfort. Attention is also focused on the so-called “gamification” of equity investing, which Rowland expects will soon become a problem for Europe.
Online brokerage houses such as Robinhood Markets Inc. have brought a large number of mom and pop investors to the US market and critics accuse them of turning trading into a social activity. Readers of online platforms like Reddit have wreaked havoc with shares of companies like GameStop Corp. and AMC Entertainment Holdings Inc. and people could be exposed if they effectively use bulletin boards as a substitute for investment advice.
The European Securities and Markets Authority has held discussions on the matter, as has the central bank of Ireland, Rowland said. While there is no timeline for new rules yet, regulations need to be “technology neutral,” she said, “so you don’t get better protections in the processes. older paper than in more online processes “.
A long way to go
Rowland has long been a champion of greater diversity in financial services, which she says could help improve regulation of the sector.
Decision making, risk control and performance are all improved with diversity, she said, adding that the industry has “a very long way to go.”
âThe investment management industry is not diversified and needs to work a lot more on this topic. This is something that we have brought to the attention of boards of directors, and it is something that is close to my heart.