Bank of Spain Report Warns Crypto Assets Could Cause Systemic
Risks
The Bank of Spain has issued a new report in which it warns about the growth of the cryptocurrency economy and its possible effects on the traditional economic system. According to the report, while the cryptocurrency market is still considered limited, its exponential growth and the fact that most of the value of the market comes from cryptocurrency assets without support could pose risks for the global economy.
This
"systemic risk" is explained by the growing links between crypto and
the traditional economy. The Bank of Spain identifies two possible
vectors. The first one has to do with the elevated volatility of these assets
and their correlation with traditional markets. On this, the document informs:
"The
high volatility of crypto assets may contribute to these dynamics, with
corrections in these assets favoring a more general correction in financial
asset prices."
The second
risk vector has to do with the elevated market cap of traditional stable coins
like USDT and USDC, which forces their issuers to maintain a high number of
support assets. This might affect the prices of these "safe" assets
in the event of an accelerated run caused by market conditions.
The report
continues to explain that, while these cryptocurrency assets pose significant
risks for the global economy, regulation is still being established and has
failed to address these concerns comprehensively. Spain does not have the
ability to regulate cryptocurrencies and has just recently issued a set of
rules and recommendations when it comes to advertising campaigns related to
these elements.
The document
clarifies that:
"In this context of lack of its own national regulation on crypto assets, the Bank of Spain does not currently have the capacity to regulate, authorize or supervise the operation of crypto asset markets or their participants."
Spain and others in the E.U. are waiting for the approval of MiCA, the Markets in Crypto Assets law framework, which, according to recent reports, will designate supranational entities to oversee cryptocurrency operations in Europe.
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