Banco de Espana, the central bank of Spain, has warned Spanish citizens of the risks associated with investment in cryptocurrencies according to a post published on its official blog.
The bank believes that “unregulated cryptocurrencies” pose a grave threat to investors due to their volatility, anonymity and lack of regulations. This conventional institutionalized response from the bank despite government assurances of sensible regulations show the lack of trust in the regulatory setup towards the new asset class.
The central bank states that cryptocurrencies like Bitcoin do not have the Deposit Guarantee Fund, which is a common practice enforced by banking regulator for the benefit of investors and depositors. It also points to the age-old argument that cryptocurrencies are not a legal tender and thus cannot be redeemed by investors at any point, thus posing risk and uncertainty. The bank claims that in the event of buying goods or services with cryptocurrencies, it would seemingly be an impossible mission for the buyer to redeem or ask for a replacement if the goods or services are not as described in the advertisement or description.
Coming directly from governor Pablo Hernandez de Cos, the public cautioning goes one step further and describes the regulatory challenges posed by cryptocurrencies. The definition of cryptocurrencies, while evolving, is still not unanimous even within the European Union. All in all, the document warns citizens regarding crypto because of high volatility, cybersecurity risks, and weak consumer rights.
While the ruling Partido Popular party is reportedly working on a bill to have cryptocurrency and blockchain regulation in the country, the move will definitely collide with the ultra-conservative behavior shown by Spain’s banking regulators. While blockchain is being implemented at a rigorous pace at the institutional level with the example of the Spanish bank BBVA announcing a blockchain-recorded syndicated loan, the regulatory clarity presents several challenges.
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