In the wake of the growing popularity of cryptocurrencies like Bitcoin, economist Marcel Fratzscher has warned of the potential consequences of inadequate regulation. “We need no crypto-friendly, but effective regulation” the president of the German Institute for Economic Research (DIW) told the “Spiegel”. “Otherwise, cryptocurrencies could become the trigger of the next financial crisis.”
US President Donald Trump had announced comprehensive relaxations for cryptocurrency firms in the US after his election win. The industry had supported the US presidential campaign with millions of dollars in donations. Similarly, in Europe, cryptocurrency providers are increasingly seeking proximity to politics. Fratzscher considers this a “dangerous detour”. “A lobby that has earned a lot of money at the expense of the general public is now using that capital to gain advantages” the economist said. “The future federal government must not give in to this temptation.”
The DIW president fears that there could be contagion effects between financial institutions if cryptocurrencies are more closely linked to the traditional financial system. Fratzscher has been critical of cryptocurrencies like Bitcoin for years, seeing them as a kind of snowball system where a few individuals reap high profits at the expense of those who later enter the cryptocurrency market.