The head of the Spanish bank considers that cryptocurrencies can destabilize the financial sector as they are decentralized. In Europe, legislators are currently working on a regulation for crypto assets known as MiCA.
Pablo Hernández de Cos recently urged the Spanish public authorities to regulate, monitor, and supervise the crypto market more tightly. The governor of the Bank of Spain considers it is necessary to contain the risk posed by cryptocurrencies like Bitcoin (BTC) and Ether (ETH). He also mentioned stablecoins such as Tether (USDT) and other decentralized services like the Decentralized Finance (DeFi) sector.
According to local media, Hernández called for close cooperation at the domestic, international, and inter-institutional levels. He thinks that the Spanish authorities can thus ensure surveillance and delve into the regulation of the cryptocurrency industry.
Hernández recognized that cryptocurrencies could help benefit banking by improving payment systems or catalyzing new functionalities. However, he stressed the risks they represent for the financial system and the clients of the banking system.
The official warned about some risks that the Financial Stability Board (FSB) had reported last week. The latter is concerned that those decentralized services are only online, and no centralized agency regulates them.
Concerning risks, Hernández stated that crypto-assets represent a new factor of competition for the financial sector. He talked about the increase in direct and indirect exposure of banks to cryptocurrencies. He believes that is dangerous for those institutions regarding both ownership and reputation.
European Authorities Get Ready to Contain the Reach of Bitcoinization
Hernández de Cos thinks that bitcoinization (or cryptoization) threatens to create parallel value transfer circuits. He argued that they are not subject to control by central banks, which limits their ability to keep possible systemic risks from occurring.
Those reasons have led him to consider relevant the initiative recently developed by the National Securities Market Commission (CNMV). That regulation, entering into force on February 17th, controls the advertising of crypto assets. He said it underlines the risks related to those markets, including the possible total loss of the amount invested.
Hernández considers that the Spanish public authorities must monitor crypto assets more tightly. He added that their work agendas already contemplate granting a privileged space to some types of crypto assets in the coming months.
In addition, European legislators are currently working on a regulation known as MiCA (Markets in Crypto Assets). The upcoming law will establish a standard supervisory architecture that will apply to cryptocurrency issuers and service providers.
The new regulatory framework will seek to include crypto assets not assimilable to other financial products already regulated. In addition, the monetary authorities could not apply it, said Hernández Col.
Cryptocurrencies play a relevant role in the economy, but the regulatory authorities from several countries want to control their use. They consider that those assets pose a risk to financial institutions, as no central agency regulates how people use them. However, they are aware that crypto-assets can improve payment systems and catalyze new functionalities in banking institutions.
By Alexander Salazar
