Pablo Hernández de Cos, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, explained that the cryptocurrency space and decentralized finance (defi) must be regulated quickly to avoid the risks of financial instability. Hernandez de Cos also mentioned how this quick approach should bring the crypto financial system into the scope of regulation before it goes big.
Bank of Spain Governor Discusses Crypto Regulation
Bank of Spain Governor Pablo Hernández de Cos, who is also part of the Basel Banking Supervisory Board, explained how he thinks cryptocurrency regulation should be approached. In a speech at the 36th Annual General Meeting of the International Swaps and Derivatives Association, Hernández de Cos Explain that there needs to be a swift move to regulate cryptocurrency and decentralized financial markets before they can develop to affect the financial stability of the economic system.
On this issue, he said:
Despite this phenomenal growth, crypto-assets still represent only around 1% of total global financial assets, and direct bank exposures are relatively limited to date. Yet we know that these markets have the potential to grow rapidly and pose risks to individual banks and overall financial stability.
In addition, the governor recommended a “proactive and forward-looking regulatory and oversight approach” to the subject, saying there can be a balance between welcoming these technologies and mitigating their risks.
Criticize Crypto and Defi
Hernández de Cos also took the opportunity to criticize the current state of the cryptocurrency market, citing feverish crypto currencies like dogecoin caused in the crypto crowd and the effect Elon Musk’s thoughts may have on these markets. He remarked:
How many $3 trillion asset classes show wild swings in valuations based on seemingly bizarre events, such as tweets posted on April 20 or Saturday Night Live sketches?
For him, these are clear signs that the market is not as decentralized as he would like, and that traits such as “robustness” or “stability” cannot be attributed to cryptocurrencies.
It is not the first time that the governor of the Bank of Spain has spoken about the dangers of the introduction of traditional financial institutions into cryptocurrencies. In February, Hernandez de Cos also warned of this issue, saying that an increase in private banks’ exposure to crypto could introduce new equity and reputational risks.
What do you think of the statements by the Governor of the Bank of Spain, Pablo Hernández de Cos? Tell us in the comments section below.
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