Mark Branson, the President of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), has criticized the setup of the crypto space at a period the sector is plagued with scandals and an extended bear market.
According to Branson, despite the sector presenting innovations, some crypto players are ‘freeloaders and crooks’ who have elevated risks associated with digital assets, he said during an interview published by European Central Bank (ECB) on November 17.
“Not all crypto business models are serious. Waves of innovation, as we know, also bring with them freeloaders and crooks. And certain crypto-assets based on blockchain technology carry significant risks, especially if they are seen as an investment.”
His sentiments come as the cryptocurrency space attempts to recover from the FTX cryptocurrency exchange crisis marred by allegations of customer funds’ misappropriation by former CEO Sam Bankman-Fried.
Crypto and financial stability
Interestingly, despite highlighting the crypto sector risks, Branson pointed out that in the current state, digital assets do not pose a threat to financial stability.
“At present, they do not pose a threat to financial stability. However, developments could move that way, should momentum return to market growth and interconnections with the traditional financial system intensify even further,” he added.
Although the regulator called for regulation of the cryptocurrency space, he warned that the excessive laws could potentially slow down innovations in the crypto space. According to Branson:
“Therefore, we need well-balanced and flexible supervisory approaches and regulatory frameworks, under which sophisticated and serious projects emerge that are able to provide benefit to customers.”
Branson, who also serves on the board of the supervision arm at the ECB, delved into the state of Germany’s crypto space in relation to the banking space.
He pointed out that banks’ interest in offering crypto-asset trading in the country remains ‘limited.’ Notably, Germany ranks among the best crypto-regulated countries, with the number of operators remaining limited.
At the same time, most crypto entities in the region will now be subjected to the recently passed European Union’s Markets in Crypto Assets Regulation.