The Governor of the Bank of Spain, Pablo Hernández de Cos, has called for increased monitoring, regulation, and oversight of the cryptocurrency market by the Spanish government.
According to Hernández de Cos, the measure is necessary to address the threat posed by popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH); stablecoins like Tether (USDT); and other decentralized services like the Decentralized Finance (DeFi) sector.
In a speech presented on February 21 at the II Observatory of Finance, Hernández called for stronger coordination at the national and international levels, as well as across institutions, to ensure that the crypto industry is monitored and regulated.
He addressed some of the benefits that cryptocurrencies provide for the financial industry during his speech, such as their ability to improve payment systems or act as a catalyst for new capabilities. He did, however, emphasize the hazards they pose to the financial system and, as a result, to the banking industry’s consumers.
De Cos raised attention to the risk the bitcoin business poses to the financial markets in general, among other risks mentioned in the governor’s message.
“It is true that the existence of these large swings in the prices of these assets can alter sentiment, causing an overreaction that ends up transcending other trading environments,” he said.
The stable coin sector, according to De Cos, is particularly vulnerable to this risk.
“In this case, the accumulation of redemption requests resulting from a generalized panic around [stablecoins] could stress the money markets, and by extension also impact the entities of custodians of the assets,” He said.
A considerable rise in transactions, according to the governor, could cause service delays or interruptions, resulting in “tensions” in payment processing.