Nowadays, it is common on many trading platforms to trade products based on cryptocurrencies, as well as to invest in so called stablecoins, which are crypto products backed by traditional financial assets such as the dollar. Crypto assets are legal in the United States, with Bitcoin classified as a commodity and cryptocurrencies treated as regulated financial assets. With the recent GENIUS Act, the United States has further reinforced the legitimacy of the crypto world and stablecoins, allowing their integration into the American financial system. US authorities expect dollar backed stablecoins to become universal digital currencies and to strengthen the global role of the dollar.
China has taken the opposite approach. In 2021, it outlawed the issuance and trading of crypto assets, banned Bitcoin mining, and earlier this month further reinforced the prohibition of stablecoins. Its strategy is to focus on the development of a centrally managed digital yuan and to isolate its financial ecosystem from the cryptocurrency universe.
And what is happening in Europe? With the MiCA regulation, the European Union has chosen an intermediate approach, approving crypto assets under strict regulation while simultaneously developing a digital euro. In this case, I believe China is right and Europe should isolate its financial system from the crypto world and from decentralized finance.
The core issue is that the financial system exists to serve the economy. Its purpose is to organize and allocate society’s resources toward productive activities. It exists to manage financial risks more effectively, to allow citizens to save for the future, states to issue debt to finance spending and investment, and companies to raise capital and manage liquidity in a balanced way. Financial speculation is the price paid for having a liquid financial system that functions properly and assigns the most accurate possible value to financial assets.
Cryptocurrencies are the opposite of all this. They have no economic function and generate no income, which means they should not even be called assets. Because they lack economic function and do not generate income, they have no fundamental reference for valuation. Price formation occurs through purely speculative mechanisms, market manipulation, excessive leverage to create artificial demand, and the invention of narratives designed to justify a certain value. Following the sharp appreciation of Bitcoin, the original cryptocurrency which through blockchain technology managed to digitally replicate the role of gold and is therefore often referred to as digital gold, thousands of alternative coins emerged. These altcoins either created their own blockchains or were built on existing ones. They were followed by millions of memecoins attempting to gain attention or value. It is estimated that more than ten million cryptocurrencies have already been launched, of which only about ten thousand have any market value, and only around ten have significant market capitalization. In this process of collective and speculative madness, millions of data servers consuming about 1% of all electricity produced worldwide are dedicated to the mining and processing of cryptocurrencies, particularly Bitcoin, representing a massive global waste of resources.
New waves of crypto frenzy have continued to emerge, including NFTs, non-fungible tokens that certify the authenticity of digital works. Some were sold for millions of dollars until the euphoria faded and it became clear that a digital image of a monkey or a cat may be unique but is not worth 40 million dollars. More recently, the focus has shifted to Digital Treasury Companies, publicly listed US firms whose sole business is to raise equity or debt worth billions and use it to purchase cryptocurrencies, betting that price appreciation will generate extraordinary profits. One example is Strategy Inc., which raised more than 25 billion dollars in 2025 alone to buy Bitcoin. In doing so, it acquired more than 700,000 bitcoins, representing 3% of all bitcoins in existence. When Bitcoin prices peaked at 120,000 dollars in July 2025, the company reached a market valuation of 128 billion dollars. And what was the only asset of a company whose market capitalization exceeded that of all Portuguese companies combined? Digital codes that generate no income and have no economic value. Following Bitcoin’s recent decline to 65,000 dollars, Strategy Inc. lost more than 60% of its market value and recorded an accounting loss of 12.4 billion dollars in the fourth quarter of 2025. Given the extreme risk, why did investors allocate capital to Strategy Inc.? Because the company promised a guaranteed dividend of more than 10% per year and claimed that, despite losses, it had raised enough funds to pay interest for three years. Anyone reading this will inevitably recall Portugal’s Dona Branca or the American Bernie Madoff and conclude that this resembles a Ponzi scheme in which promised returns are paid using money from the most recent investors. That is exactly what it is. It is a crypto wrapped Ponzi scheme in plain sight, now being replicated by multiple companies and resulting in a massive accumulation of systemic risk.
The most recent crypto craze involves stablecoins, crypto assets pegged one to one to a financial asset. The most well-known example is USDT, issued by Tether, which is worth one dollar and whose issuance is supposedly backed by dollar reserves. This allows people to buy USDT instead of buying dollars. But why would anyone want to buy a crypto asset identical to a financial asset if they can simply buy the real one? Criminals, of course. Blockchain transactions are anonymous. We know they occur, but not who carries them out. It is estimated that around 150 billion dollars in illicit and criminal activity took place in 2025 using cryptocurrencies, with a notable recent shift toward stablecoins because they preserve value more reliably than Bitcoin.
All the efforts Europe has made to combat corruption, money laundering, fraudulent transactions, and criminal activity are undermined by the growth of cryptocurrencies and stablecoins. Currency issuance should not be decentralized. Money is built on trust, regulation, and transparency to serve the economy. After the financial crisis of 2008 to 2010, Europe created a strongly regulated and well capitalized financial system with robust risk management, fostering trust in the euro and resilience in its financial ecosystem. This should not be put at risk by embracing crypto assets.
In conclusion, when it comes to cryptocurrencies, China is right. Crypto assets are a financial disaster unfolding before our eyes. They distort the global allocation of resources and savings, destroy value, consume scarce resources, generate systemic risks, and enable widespread speculation and illegal transactions. The European Union and the European Central Bank should isolate the European financial system from crypto assets, launch the digital euro to prevent the expansion of stablecoins, and strengthen the security, trust, and stability of the euro, directing the savings of European companies and citizens toward safe investments that support Europe’s development.
Filipe Santos, Dean of CATÓLICA-LISBON