Pablo Hernández de Cos, president of the Bank of Spain and chairman of the Basel Committee on Banking Supervision, explained that the cryptocurrency space and decentralized finance (defi) need to be regulated quickly to avoid the risk of financial instability. Hernandez de Cos also mentioned how this quick approach should bring the crypto-financial system into regulation before it gets bigger.
Spanish Bank President Talks Crypto Regulation
Bank of Spain President Pablo Hernández de Cos, who is also a member of the Basel Committee on Banking Supervision, explained his views on how cryptocurrency regulation should be addressed. Hernández de Cos explained in his keynote speech at the 36th Annual General Meeting of the International Swaps and Derivatives Association that swift action is needed to regulate cryptocurrencies and decentralized financial markets before they can evolve into financial systems that affect the economic system. stability.
On this issue, he stated:
Despite this staggering growth, crypto-assets still represent only around 1% of total global financial assets, and banks’ direct exposure has been relatively limited to date. However, we know that these markets have the potential to expand rapidly and pose risks to individual banks and overall financial stability.
Additionally, the governor recommended an “active and forward-looking regulatory approach” to the topic, declaring that a balance can be struck between welcoming these technologies and reducing their risks.
Criticizing cryptocurrencies and Defi
Hernández de Cos also took the opportunity to criticize the current state of the cryptocurrency market, citing the crypto-mania meme currencies (like Dogecoin) caused by the crypto crowd and the impact Elon Musk’s ideas could have on these markets. He said:
How many $3 trillion asset classes are showing wild valuation swings based on seemingly bizarre events such as an April 20 tweet or a Saturday Night Live skit?
To him, these are clear signs that the market is not as decentralized as expected and that characteristics such as “robustness” or “stability” cannot be attributed to cryptocurrencies.
This is not the first time the head of the Bank of Spain has spoken about the dangers of introducing traditional financial institutions to cryptocurrencies. Back in February, Hernandez de Cos also warned of the issue, saying that increased exposure of private banks to cryptocurrencies could create new equity and reputational risks.
What do you think of the statement by the Governor of the Bank of Spain, Pablo Hernández de Cos? Let us know in the comments section below.
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