Bank of Spain Warns of Extended use of Unregulated Crypto

Margarita Delgado, the Bank of Spain’s deputy governor, recently shared her opinion of cryptocurrencies and how they are contributing to the increase in risks in today’s economy. PWC hosted an event by the name of ‘A Climate of Change’, where the deputy governor elaborated that the extended and continued use of crypto may expose the 12% of the country’s population, which is holding cryptocurrencies, to a number of risks. The multinational professional services network had hosted the event where she shared her opinion and it had been focused on discussing the financial world’s changing nature.

According to the deputy governor, there a series of risks associated with the extended use of cryptocurrencies to the system, which include the general lack of knowledge amongst people regarding these digital assets. Some of the other risks that are also associated include the obscurity associated with the segment of decentralized finance, which can lead to over-leveraging, thereby resulting in payment problems. Delgado also talked about the effects of the crypto segment on some of the other markets as well. She said that there could be a contagious effect of the volatility of the crypto segment and the overreaction and panic could also be shifted towards other trading environments.

Delgado went on to highlight the effects that holding and investing crypto assets could also have on traditional banking because this would see the rise of a mixed sector that is capable of offering both type of services to its clients. She asserted that the introduction of these digital assets would lead to an increase in reputational and patrimonial risks. Alarms have already been raised by the Bank of Spain in regard to traditional banks offering crypto-based services to its clients. The Bank of Spain’s governor had talked about the dangerous of this occurring back in February when he appeared at the Finance II Observatory.

He had spoken in a similar way that exposure to crypto assets would lead to an increase in risks for the banking sector. According to Delgado’s estimates, there are approximately 12% people who own some kind of crypto asset in Spain. Therefore, she believes that it is necessary to have such a debate because it would help them in having a clear picture on cryptocurrencies. She also stated that it was a must to ensure that those who are investing in cryptocurrencies have complete knowledge of the risks that are associated with them.

The deputy governor said that they need to understand the risks they have been exposed to and should not be investing in these crypto assets solely due to their expectations of high revaluations. The concerns of the Bank of Spain are similar to those that have been expressed by a number of central banks all over the world. Cryptocurrencies are becoming a hot topic in a number of countries and most of the global central banks have not been in favor of regulating these volatile assets, which they believe are very risky and can be a threat to the economy.