The cryptocurrency market is entering a bear market cycle and this has its critics speaking out once more. This includes the Bank of Spain’s Governor, Pablo Hernandez de Cos. He talked about the growth of the crypto space and the existence of these currencies. According to the governor, the crypto market may not have reached a very large valuation on an international level, it is a fact that it has grown more than subprime mortgages before 2008 when the financial crisis struck. Moreover, the links of the crypto market with the traditional finance space are also growing.
He said that integrating traditional financial institutions with these digital currencies was extremely dangerous. Speaking at an event, Pablo Hernandez de Cos said that the last bull market had seen a number of trading instruments being launched, including investment funds, futures and ETFs. All of these have managed to mix the unregulated cryptocurrency market with the institutions that are part of traditional finance. According to Hernandez de Cos, some of the prominent private companies had publicly declared the fact that they wanted to use crypto assets for managing their cash, while others were also making similar moves.
Therefore, this drove the Bank of Spain’s governor to speak out because the addition of these digital currencies will only bring instability in the Spanish market. The country has seen exponential growth of the crypto market, as some estimates suggest that crypto-related transactions in Spain are worth 60 billion euros, which brings it to $64 billion. This was also mentioned by the Spanish central bank’s governor and he said that it was larger than the subprime mortgages had been before the financial crisis had occurred. He also highlighted that the trading volumes of some of the leading cryptocurrencies in the market, such as Bitcoin, Tether and Ethereumhad also reached the same level of volumes that had been seen on the New York Stock Exchange (NYSE).
Such increase in trading volumes and the volatility of the cryptocurrency market has convinced the governor that there is need for regulation. He stated that the Financial Stability Board (FSB) had recently stated that if these markets are left unsupervised and unregulated, they would reach a tipping point quickly. It is not the first time that a warning about cryptocurrencies has been issued by the Bank of Spain. They have talked about the risks of associating the crypto market with traditional ones before as well.
Back in April, the banking institution had reported that the rise of stablecoins as well as the interconnection between traditional and crypto markets can put the economic stability at risk. The recent condition of the crypto market also indicates that it might be time to regulate it. Already, authorities all over the world are looking into it, as the collapse of the TerraUSDstablecoin shook the entire space and wiped off almost half a trillion from its total capitalization. Its sister token LUNA also fell to zero and many people lost their entire savings and investment.
