The bank explained that these assets, which are ostensibly not supported by any government, can pose systemic risks due to their adoption by institutions traditional and lack of regulation.
According to the Bank of Spain, Crypto Assets could cause systemic risks
The Bank of Spain issued a new report warning about the potential impact of cryptocurrency on the traditional economy. The report states that while the cryptocurrency market is still limited, its rapid growth and the fact it is largely made up of cryptocurrency assets, without any support, could present risks to the global economy.
This "systemic threat" can be explained by the increasing links between crypto and traditional economies. The Bank of Spain identified two possible vectors. The first is the increased volatility of these assets and their relationship with traditional markets. The document provides information on this topic:
These dynamics may be influenced by the high volatility of crypto assets. Corrections in these assets could favor a general correction in financial assets prices.
The second risk is the high market cap of traditional stablecoins such as USDT or USDC. This forces issuers of these coins to have a large number of support assets. These "safe" assets might be affected by an accelerated market run.
Regulators Still Not Here
This report continues to state that while cryptocurrency assets present significant risks to the global economy, regulations are still being developed and have not addressed these concerns fully. Spain is not able to regulate cryptocurrency and just issued a set rules and recommendations regarding advertising campaigns involving these elements.
This document clarifies:
The Bank of Spain is unable to supervise, regulate, or authorize the operations of crypto asset markets and their participants in this absence of national regulation.
Spain and other members of the E.U. We are still waiting on approval of MiCA (the Markets in Crypto Assets Law Framework) which, according to recent reports will designate supranational entities for overseeing cryptocurrency operations in Europe.