The main problem is that, at the moment, cryptocurrencies do not yet have regulation.
The event ‘Mundo Crypto, Metaverse Day’, gathered some 7,000 people yesterday in Madrid, according to the organizers. This festival hosted the meeting between cryptocurrency users who came to receive training on this new financial technology.
The Madrid left-wing parties unsuccessfully urged the government of the Community of Madrid to provisionally suspend the event, appealing to the public ownership of the WiZink Center. But the regional executive hid behind the fact that being the management of the private event, the Community lacks the power to suspend the event, and delegated the responsibility of “ensuring the proper functioning of the market” to the economic authorities.
We must bear in mind, however, that the Ombudsman already asked on Friday to investigate whether the organizers had the necessary permits to organize an economic event of these characteristics. Besides, the National Securities Market Commission (CNMV) had already stipulated that Mundo Crypto does not have a license to advise on financial instruments, having previously recalled that crypto assets are “unregulated products and have some relevant risks.”
Economic Bubble?
The cryptocurrency management platforms complained about unjustified harassment by the media and some political representatives, a crooked accusation by regulators, and an unfounded campaign of social boycott. What marketers of the revolutionary Blockchain technology cannot deny is that investing in cryptocurrencies, as experts have repeatedly warned, represents a high-risk gamble.
It should not be forgotten that, although the value of this product has increased exponentially in recent years, it has also gone through major crises. Bitcoin has already lost 70% of its peak value, and NFTs have depreciated 80% since last year. The high volatility and sharp declines in these assets, as well as cases of fraud and the bankruptcy of some platforms, have led many to consider this industry to be a real bubble.
In addition, options that promise to make easy money always proliferate in times of crisis. Along with their rhetoric of success accessible to anyone, they can be a difficult temptation to resist for those who are more pressured by economic hardships, and do not have the necessary financial culture. Not surprisingly, many investors have suffered massive losses in their savings.
Lack of Regulation
The main problem with cryptocurrencies is that, at the moment, they are in a kind of legal limbo: their sale and promotion are not prohibited, but they are not yet regulated.
It is true that market innovations are always ahead of the regulatory capacity of governments. But the dangers associated with this economic activity justify the urgency of new legislation to fill the existing legal vacuum and empower public authorities to intervene in the sector without committing any illegality.
It is also necessary that society does not let itself be stunned by the futuristic and emancipatory imaginary promoted by ‘crypto enthusiasts’.
In this sense, the CNMV law that regulates investment advertising in digital assets is a good first step. To this measure should be added the obligation for issuing platforms to offer investors information that allows them to analyze the risks of crypto assets and invest prudently.
All in all, the regulations cannot be sufficiently effective unless the EU approves a community regulation that ensures the stability of the traditional financial sector and the harmonic fit of the new monetary technology.
By Audy Castaneda
