Bank of Spain is worried about inflation by cryptocurrency.

The governor of the Bank of Spain is concerned about financial instability triggered by cryptocurrency.

The governor of the Bank of Spain and chairman of the Basel Committee on Banking Supervision, Pablo Hernández de Cos, explained that the cryptocurrencies area and decentralised finance (defi) must be governed early to prevent economic uncertainty concerns. Hernandez de Cos also noted how this quick approach should put the cryptocurrency monetary sector under the legislation before it becomes too large.

The governor, who is also a member of the financial oversight Basel Committee, stated his thoughts on cryptocurrency governance.

Hernández de Cos stated in a commencement address at the 36th annual general meeting of the International Swaps and Derivatives Association that there must be a rapid step to supervise cryptocurrencies and decentralized finance markets before they may impact the monetary sustainability of the economic structure.

On this subject, he remarked that, although there is a remarkable rise, crypto assets still account for just approximately 1% of the overall world's economic holdings, and banks' direct exposures are now restricted. Nonetheless, we know that such markets have the potential to grow rapidly, posing hazards to individual banks as well as broader financial stability.

Additionally, the governor advocated for a "preemptive and forward-thinking regulatory and enforcement strategy" to the issue, stating that there might be a compromise between accepting advanced technologies and limiting their hazards.

Hernández de Cos also utilized the occasion to critique the present situation of the cryptocurrency market, highlighting the cryptocurrency craze meme currencies like dogecoin produced among the cryptocurrency population, as well as the impact Elon Musk's opinions may have on these marketplaces. He said, "How many $3 trillion types of investments demonstrate dramatic swings in values based on apparently insignificant events like tweets made on April 20th or Saturday Night Live skits?"

According to Governor, these are strong indications that the marketplace is not as decentralised as it aspires to be, and that characteristics like "resilience" or "safety" cannot be assigned to digital currencies.

It's not the first time the Governor of the Bank of Spain has spoken out against the risks of bringing cryptocurrency to formal financial institutions. Hernandez de Cos warned about this concern in February, warning that increasing private banks' exposure to crypto might create new equity and reputational concerns.