Once in Albania, the alternative finance industry emerged to supplant a technologically backward banking system. The models from its dramatic collapse continue to be relevant today. Essentially, a post-communist entrepreneurial success story is a pyramid scheme of proportions. Smooth marketing and high promises shaped a decentralized, informal crime-facilitating ecosystem into a mainstream mania that sucked in people’s multitudes, unchecked by fitful and feeble regulatory warnings. Cryptocurrency enthusiasts will control at the insinuation that there are parallels between the corrupt world of Albanian Ponzi schemes and the digital assets industry. Even skeptics might feel the comparison seems a little bit unfair. After all, some exciting inventions started to emerge from crypto. However, there are still some complex lessons from the Albanian collapse for regulators now surrounding the crypto world.
Some Details from The History
Albania’s 1990s pyramid crisis is interesting that it is worth investigating. After the cold war, the country initially witnessed growth reported as adequate by the IMF. However, its national banks were sinking and getting up with bad loans, defining their ability to stretch funding. As a result, Albanians frequently applied to a mixed bunch of informal quasi-banks and foreign exchange dealers. At their peak, the trivial value of the pyramid schemes was equal to partial of Albania’s annual economic output.
Despite commonly useful links to organized crime, they enjoyed a façade of respectability because of swish adverts and the cultivation of local politicians. The Albanian central bank warned of the dangers. However, prosecutors failed to implement its rules, claiming that these alternative finance companies came in a legal blind spot. By the late ’60s, the schemes failed, triggering a violent crisis that took estimated 2,000 lives. The parallels between today’s crypto ecosystem and the Albanian pyramid schemes are more conceptual than concrete. However, both depended entirely on regular inflows of money from fresh beginners to be sustained.
