--- title: Insights | Martin Finnegan | Cryptocurrency description: Punter Southall Law Partner, Martin Finnegan gives his opinion on cryptocurrency in this latest piece image: https://www.puntersouthall.com/hubfs/bitcoin%20blog%20image-1.jpg --- - [ Our services ](https://www.puntersouthall.com/our-services) - [ Pensions ](https://www.puntersouthall.com/pensions) - [ Defined benefit ](https://www.puntersouthall.com/defined-benefits) - [ Defined contribution ](https://www.puntersouthall.com/pensions#defined-contribution) - [ SIPP & SSAS ](https://www.puntersouthall.com/pensions#self-invested-pensions) - [ Expert witness ](https://www.puntersouthall.com/expert-witness) - [ Analytics ](https://www.puntersouthall.com/analytics) - [ Numbers for lawyers ](https://www.puntersouthall.com/analytics#numbers-for-lawyers) - [ Data compliance ](https://www.puntersouthall.com/analytics#data-compliance-for-data-confidence) - [ Legal ](https://puntersouthall.law/) - [ Employee benefits ](https://www.puntersouthall.com/service-update-apr-24) - [ Financial planning ](https://www.puntersouthall.com/service-update-apr-24) - [ Insights ](https://www.puntersouthall.com/insights) - [ Blogs ](https://www.puntersouthall.com/insights) - [ Our story ](https://www.puntersouthall.com/our-story) - [ People & culture ](https://www.puntersouthall.com/people-culture) - [ Our people ](https://www.puntersouthall.com/staff-directory) - [ Awards ](https://www.puntersouthall.com/awards) - [ Careers ](https://www.puntersouthall.com/careers) - [ Contact us ](https://www.puntersouthall.com/contact) [![Punter Southall - Animated icon](https://www.puntersouthall.com/hubfs/raw_assets/public/punter-southall-hc/library/images/client/logos/punter_southall_anim_logo.gif) ![Punter Southall - Text logo](https://www.puntersouthall.com/hubfs/raw_assets/public/punter-southall-hc/library/images/client/logos/punter_southall_text_logo.svg) ](https://www.puntersouthall.com/) ** ** ** - [ Our services ** ](https://www.puntersouthall.com/our-services) - [ Pensions ** ](https://www.puntersouthall.com/pensions) - [ Defined benefit ](https://www.puntersouthall.com/defined-benefits) - [ Defined contribution ](https://www.puntersouthall.com/pensions#defined-contribution) - [ SIPP & SSAS ](https://www.puntersouthall.com/pensions#self-invested-pensions) - [ Expert witness ](https://www.puntersouthall.com/expert-witness) - [ Analytics ** ](https://www.puntersouthall.com/analytics) - [ Numbers for lawyers ](https://www.puntersouthall.com/analytics#numbers-for-lawyers) - [ Data compliance ](https://www.puntersouthall.com/analytics#data-compliance-for-data-confidence) - [ Legal ** ](https://puntersouthall.law/) - [ Employee benefits ** ](https://www.puntersouthall.com/service-update-apr-24) - [ Financial planning ](https://www.puntersouthall.com/service-update-apr-24) - [ Insights ** ](https://www.puntersouthall.com/insights) - [ Blogs ** ](https://www.puntersouthall.com/insights) - [ Our story ](https://www.puntersouthall.com/our-story) - [ People & culture ** ](https://www.puntersouthall.com/people-culture) - [ Our people ** ](https://www.puntersouthall.com/staff-directory) - [ Awards ** ](https://www.puntersouthall.com/awards) - [ Careers ** ](https://www.puntersouthall.com/careers) - [ Contact us ](https://www.puntersouthall.com/contact) - ** ** Law 1 June 2022 [** Back ](https://www.puntersouthall.com/insights/) **Author:** Punter Southall Law # Opinion: Cryptocurrency - The World Won’t Listen Published this week in [Funds Europe](https://www.funds-europe.com/news/opinion-cryptocurrency-the-world-won-t-listen), we thought this opinion piece by Punter Southall Law Partner, Martin Finnegan, was worthy of sharing further. *A shadow banking system may be resulting from the hype around crypto currency - and ironically the UK's advertising authority appears more concerned about damage than does the financial regulator, says **Martin Finnegan**, of Punter Southall Law.* Recently on Dutch TV, Christine Lagarde, President of the European Central Bank added her voice to those who have already expressed the view that cryptocurrencies are worthless. But in reality, is anyone listening?   Whilst Lagarde may not be right about all crypto-assets – such as NFTs – she is, I think, right about the value of crypto-currencies. Ask yourself whether any other asset class(es) has ever been described in a similar manner by any central banker or regulator…..and perhaps that’s because cryptocurrencies are not assets.  Regardless of what price any individual currency actually trades for, cryptocurrencies are not assets in any conventional real world sense. Nor does it lead to protective recognition in any regulatory sense. # Shadow banking There is a legitimate question as to whether the sheer volume and scale of crypto currency speculation is now forming part of a shadow banking 2.0 system and if so, whether that could ultimately destabilise conventional markets just as the dotcom crash did at the turn of the century.     The answer is, I think, quite possibly - not necessarily as a definitive cause but because it will add fuel to the recessionary flames already sparked by the impact on conventional markets of Russia’s war on Ukraine and also, the long awaited but predictable readjustment to the hyped valuations in the tech sector.  And what then? Price-volatility has of course been the hallmark of cryptocurrencies and the draw for speculators.   However, price collapse will mean that the game is up and, when the death spiral occurs across all cryptocurrencies, it will inevitably exacerbate recessionary forces.  Why?   Because the loss of serious corporate and institutional real fiat money in the crypto-system will not be available to invest in real world projects. ## "Irrational Exuberance" Alan Greenspan, former Chair of the US Federal Reserve, coined the term “irrational exuberance” in 1996 when he asked: at what point do we know when irrational exuberance has unduly escalated asset values? The Yale Professor, Robert Shiller, author of the book ‘Irrational Exuberance’ and the apparent source of Greenspan’s original use of the term, defines it as: *“the psychological basis of a **speculative bubble**…. a situation in which news of price increases **spurs investor enthusiasm**, which spreads by **psychological contagion** from person to person, in the process **amplifying** stories that might justify the **price increases**, and bringing in a **larger and larger class of investors** who, despite **doubts about the real value of an investment**, are drawn to it partly by **envy of others' successes and partly through a gamblers' excitement**”* More than 20 years post the publication of this work, Shiller cites bitcoin as the best modern-day example of it and without doubt, we’ve all seen examples of “psychological contagion” over the past couple of years. ### Regulation - Irrational Apathy? Whilst crypto-speculation may be fuelled by excessive enthusiasm, the same cannot be said of the regulators. Whilst the FCA and other regulators are on public record stating that people should not stake more than they can afford to lose - the default regulator position with any form of gambling - they do not appear to be going far enough.   It seems ironic that the Advertising Standards Agency in the UK has done more to limit the promotion of cryptocurrencies than the FCA in recent times.  In March 2022, it announced that it had issued more than 50 enforcement (guidance) notices regarding cryptocurrencies in order to require adverts: - to make clear that cryptocurrencies are unregulated in the UK and that the value of investments are variable and can go down; - neither state nor imply that investment decisions are trivial, simple, easy or suitable for anyone; nor - imply a sense of urgency to buy or create a fear of missing out, or that investments are ‘low risk’. The FCA is failing to exercise and implement equivalent and appropriate regulatory oversight.   Why - if the ASA is exercising its’ powers to protect the consumer - has the FCA failed to bring in an outright ban with sanctions for enablers of cryptocurrency trading? But perhaps its greater failure is its talk of adopting central bank digital currencies.   Firstly, they are not going to happen overnight - ECB officials are working to a four-year timeframe – so such discussion is premature given the heady world we’re in and secondly, the fact that central banks might ultimately adopt digital currencies arguably and wrongly confers a legitimacy on today’s non-central bank digital currencies.    Promoters of cryptocurrencies and crypto exchanges are, for obvious reasons, very happy for their customers to make that association.    The comparison from which they benefit is wholly misleading – less of an apples to apples comparison than a fresh to rotten apple comparison.     #### Morrissey's complaint The title of this article – the world won’t listen - might resonate with readers of a certain age; it is the title of a Smiths album released in 1987 reflecting Morrissey’s belief that mainstream radio was not paying attention to the band and delaying their break-through.   Legarde, regulators and central bankers may well then be the Morrissey and Johnny Marr of 2022; they may be in broadcast mode but they are being loudly drowned out by the crypto din.   But to end where I started: once the music stops and the crypto-currency party comes to an end, there’s going to be an almighty hangover….and one way or another, the party will stop.   **Martin Finnegan is chief operating officer at Punter Southall Law* [*https://www.funds-europe.com/news/opinion-cryptocurrency-the-world-won-t-listen*](https://www.funds-europe.com/news/opinion-cryptocurrency-the-world-won-t-listen) Share [** ](mailto:?subject=Opinion:%20Cryptocurrency%20-%20The%20World%20Won’t%20Listen&body=https://www.puntersouthall.com/insights/opinion-cryptocurrency-the-world-wont-listen) [** ](http://twitter.com/intent/tweet?text=Opinion:%20Cryptocurrency%20-%20The%20World%20Won’t%20Listen&url=https://www.puntersouthall.com/insights/opinion-cryptocurrency-the-world-wont-listen) [** ](http://www.linkedin.com/shareArticle?mini=true&url=https://www.puntersouthall.com/insights/opinion-cryptocurrency-the-world-wont-listen) [** ](https://www.facebook.com/sharer/sharer.php?u=https://www.puntersouthall.com/insights/opinion-cryptocurrency-the-world-wont-listen) [** Back ](https://www.puntersouthall.com/insights/) ### Get in touch today At Punter Southall, we have a team of highly skilled risk, compliance and legal experts with deep in-house practical experience. 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