Pablo Hernandez de Cos is the governor of the Bank of Spain, and the chair of the Basel Committee on Banking Supervision. He explained that decentralized finance (defi), and the cryptocurrency space need to be regulated quickly to avoid financial instability. Hernandez de Cos mentioned that this rapid approach should bring the crypto-financial system under regulation before it gets bigger.
Talks by Governor of Bank of Spain on Crypto Regulation
Pablo Hernandez de Cos is the governor of Bank of Spain and a member of the Banking Supervision Basel Committee. He shared his views on how cryptocurrency regulation should be handled. Hernandez de Cos gave a keynote address at the 36th Annual General Meeting of the International Swaps and Derivatives Association. He explained how it is necessary to quickly regulate cryptocurrency and decentralized financial markets to prevent them from growing to threaten the financial stability of our economy.
He stated that he was addressing this issue:
Despite the phenomenal growth, cryptoassets only represent 1% of global financial assets. Banks’ exposures to them are also relatively small. We know these markets can grow rapidly and present risks to financial stability and individual banks.
The governor also recommended that the subject be dealt with in a proactive and forward-looking regulatory approach. He stated that it is possible to strike a balance between the benefits of these technologies and the risks they pose.
Criticizing Crypto and Defi
Hernandez de Cos took the opportunity to criticize current cryptocurrency market state. He cited the crypto fever meme currencies such as dogecoin that were created in crypto crowd, and the impact that Elon Musk’s thoughts could have on these markets. He made the following comment:
Are there \$3 trillion worth of asset classes that show wild swings in their valuations due to seemingly random events such as tweets published on April 20th or Saturday night Liveskits broadcasts?
These are, according to him, clear indications that the market isn’t as decentralized as it intends to be and that cryptocurrencies cannot be blamed for traits like “robustness”, or “stability”.
The Governor of the Bank of Spain spoke about the risks of introducing traditional financial institutions into cryptocurrencies. In February, Hernandez de Cos also warned on this topic, warning that an increase in exposure of private banks crypto could pose new equity and reputational risk.