Bank Of Spain Governor Highlights Need To Accelerate Crypto And DeFi Regulations

JAKARTA – The Governor of the Bank of Spain and the chairman of the Basel Committee for Banking Supervision, Pablo Hernandez de Cos, explained that cryptocurrencies and decentralized finance (DeFi) needed to be regulated quickly. This is to avoid financial instability.

Hernandez de Cos also mentioned how this fast approach must bring the crypto financial system into the regulatory sphere before it grows bigger. Even so, crypto assets actually represent only one percent of the world's total financial assets.

“Despite this phenomenal growth, crypto assets still represent only about 1% of total global financial assets, and banks' direct exposure has been relatively limited to date", said Hernandez de Cos.

"But we know that the market has the potential to grow rapidly and pose risks to individual banks and financial stability as a whole", he continued.

Discussion About Crypto Regulations

The governor of the Spanish central bank explained his opinion on how crypto regulations should be handled. In a keynote offered at the 36th annual general meeting of the International Swaps and Derivatives Association, Hernandez de Cos explained, fast steps to regulate crypto and DeFi before they grow bigger and have an impact on the economic system.

Hernandez de Cos also recommends a “proactive and forward-looking approach to regulation and oversight". He said there is a balance to welcome this technology and reduce the risks.

In addition, Hernandez also criticized the current state of cryptocurrencies. He cited the Dogecoin “crypto fever" caused by the crypto community and Elon Musk's thinking in this market.

“How many $3 trillion asset classes exhibit wild swings in valuation based on seemingly outlandish events, such as tweets published on April 20 skits or Saturday Night Live", Hernandez said.

The governor of the Spanish central bank is not the first time to criticize this digital currency. In February, he also warned about the problem of introducing traditional financial institutions to cryptocurrencies.

He said the increased exposure of private banks to crypto would introduce new equity and reputational risks.