The rising popularity of cryptocurrencies such as bitcoin is \u201cof great concern,\u201d according to Derville Rowland, one of the top officials at Ireland\u2019s central bank.<\/p>\n
\u201cCrypto assets are quite a speculative, unregulated investment,\u201d and people should be \u201creally aware they could lose the whole of that investment,\u201d the central bank\u2019s director general for financial conduct said in an interview.<\/p>\n
Rowland, whose department at Ireland\u2019s central bank is known for having imposed heavy fines on some of the nation\u2019s biggest financial firms, joins a host of central bankers who have raised the alarm on crypto investments.<\/p>\n
Bank of England Governor Andrew Bailey has warned cryptocurrencies have no intrinsic value and that people should only buy them if they\u2019re prepared to lose their money.<\/p>\n
Last week Bank of Japan Governor Haruhiko Kuroda added his voice to the chorus of concern, noting Bitcoin\u2019s \u201cextraordinarily high\u201d volatility. Bitcoin has risen about 30% year to date.<\/p>\n
Enforcement<\/strong><\/p>\n Rowland is formidable voice in regulation. In July she will take over as chairwoman of the European Securities and Markets Authority (ESMA)\u2019s investment management standing committee – the group which helps prepare regulations for the funds industry.<\/p>\n Her rise to prominence has been as the face of the Irish central bank\u2019s enforcement investigations. The regulator has recently fined or is investigating most of Ireland\u2019s retail banks for mortgage overcharging.<\/p>\n In March it fined Davy, the nation\u2019s biggest securities firm, for breaches that ultimately resulted in the resignations of the CEO and other executives. That firm is now for sale as a result of the fallout. Rowland said at the time Davy \u201cneed only look in the mirror\u201d when it \u201casks itself how things went so catastrophically wrong.\u201d<\/p>\n \u2018Gamification\u2019<\/strong><\/p>\n Cryptocurrencies aren\u2019t the only digital investments causing unease for regulators. Attention is also focused on the so-called \u2018gamification\u2019 of stock investing, which Rowland expects to become an issue for Europe soon.<\/p>\n Online brokerages such as Robinhood Markets Inc have brought a slew of mom and pop investors into the US market and critics accuse them of turning trading into a social activity.<\/p>\n Readers of online platforms like Reddit have played havoc with shares of firms such as GameStop Corp and AMC Entertainment Holdings Inc. and people could be exposed if they are effectively using message boards as a substitute for investment advice.<\/p>\n The European Securities and Markets Authority has held discussions on the issue, as well as Ireland\u2019s central bank, Rowland said. While there\u2019s not yet a time-line for any new rules, regulations need to be \u201ctechnology neutral,\u201d she said, \u201cso that you\u2019re not getting better protections in older paper based processes then you are in more online processes.\u201d<\/p>\n A long way to travel<\/strong><\/p>\n Rowland has long been a champion of greater diversity in financial services, which she says could help improve regulation of the industry.<\/p>\n Decision making, risk control and performance are all improved with diversity, she said, adding that the industry has \u201chas a very long way to travel.\u201d<\/p>\n \u201cThe investment management sector is not diverse, and needs to work considerably harder on this topic. It\u2019s something that we have brought to the attention of boards, and it\u2019s something that is dear to my heart.\u201d<\/p>\n
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