Bank of Spain Report Warns About Cryptocurrency Usage and Its Effect on Financial Stability

Bank of Spain Report Warns About Cryptocurrency Usage and Its Effect on Financial Stability

The Bank of Spain has issued a new report that touches on the subject of the popularity of cryptocurrency usage and the possible effects it might have on the financial stability of the nation. In the document, the bank explains that these assets — which ostensibly don’t have any kind of support behind them — can introduce systemic risks via their adoption by traditional institutions and the lack of regulation over them. Crypto Assets Could Cause Systemic Risks According to the Bank of Spain

The Bank of Spain has issued a new report where 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. On this, 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 stablecoins 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 case of an accelerated run caused by market conditions. Regulation Still Not There

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. Tags in this story Bank of Spain, cryptocurrency market, MiCA, report, systemic risks

What do you think about the latest report on the risks that cryptocurrencies present to the global economy issued by the Bank of Spain? Tell us in the comments section below. Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved. Google Trends Study Shows SHIB Is the Most Popular Crypto in the UK NEWS | 3 hours ago Working Study Says Despite Legal Tender Status, Bitcoin Is Not a Widely Accepted Medium of Exchange in El Salvador NEWS | 9 hours ago

Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleAPENFT Marketplace Launch Livestream With TRON Founder H.E. Justin Sun Next articleL2 Scaling Startup Optimism Reveals Governance Collective, Native Token, and ‘Many Airdrops’ Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItCentral Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year

The Central Bank of Brazil has confirmed that the institution will run a pilot test regarding the implementation of its proposed central bank digital currency (CBDC), the digital real. Roberto Campos Neto, president of the bank, also stated that this ... read more.Today"s Top Ethereum and Bitcoin Mining Devices Continue to Rake in Profits UAE Airliner Emirates to Launch NFTs and Experiences in the Metaverse Fed"s Bullard Wants to Raise Bank Rate to 3.5% by Year"s End, Hints at 75 Basis Point Rate Hike FBI Issues Alert Concerning Malicious State-Sponsored North Korean Hackers Targeting Crypto Firms