Spain’s regulatory stance on crypto assets and the push for stability
Regulators remain cautious about the crypto-asset sector. Multiple scenarios could unfold in the coming months, but the Bank of Spain is most likely to favor instruments that offer greater stability and a lower risk profile. The most well known option is stablecoins, digital currencies backed by traditional assets like the dollar. In its latest Financial Stability Report, the regulator notes that if this trend solidifies, the links with the traditional financial system become more evident. That interconnection would be challenging for financial stability, because while operational risks might ease, the growing size of the crypto market and its tighter ties to traditional finance could raise systemic risk in any event.
In recent months, investors preferred smaller cryptocurrencies yet still leaned toward digital assets with relative stability, notably bitcoin. Ethereum has stood out, rising about 70 percent since the start of the year, while bitcoin has climbed more than 80 percent. Interest also remains in cardano, solana, and filecoin. The regulator has observed a rapid expansion in the valuations of several assets even as bitcoin stabilizes, heightening concerns for the Bank of Spain, which recalls the severity of the last crisis. Fresh banking turmoil from a recent period underscored how deposits in these so‑called hard currencies can act as a contamination channel for banks’ reserve assets. Security vulnerabilities were part of the discussion as well.
This context helps justify ongoing regulatory momentum at both national and supranational levels. The goal is clear: bring crypto assets under tighter oversight even if a formal regime has yet to land. The report points to 2022 as a series of crisis episodes that justified regulatory tightening. Early alarms were sounded by the Terra/Luna crash in mid‑2022, followed by the bankruptcy of FTX, which illustrated how centralized, interconnected and opaque contract structures could harm solvency when client funds were diverted to a separate enterprise led by Sam Bankman-Fried.
FTX’s collapse marked the start of a string of failures tied to the same firm, including BlockFi, Genesis, and Gemini, though these did not trigger systemic issues for the broader banking system, given their limited exposure to crypto assets overall. The impact on traditional finance has been uneven, with some institutions feeling a sharper sting than others. The regulators warn about concentrating deposits and crypto holdings, especially if such assets become a preferred savings instrument or a dominant means of payment replacing bank deposits.
Strengthening editing
Even with bureaucratic pace remaining slow, a succession of industry crises has fortified regulators against decentralized finance. Some regulations have been postponed beyond 2024. The report emphasizes that, given the high risks still present, authorities are focused on protecting individual investors and limiting externalities within the financial system. The European Systemic Risk Board continues to coordinate cross‑border standards among authorities and international bodies that shape financial activity.
If no further delay occurs, the MiCA regulation will first be enacted to harmonize EU rules on crypto asset issuers, exchanges, and currencies across member states. The legislation, approved in principle in 2022, is expected to take effect in 2024, with first applications and effects unfolding 18 months later. MiCA classifies crypto assets into three groups: electronic money tokens, which are tied to the value of official currencies; entity-referenced tokens, designed to maintain a fixed value relative to another asset or right; and other tokens. Regardless of the category, a white paper must be prepared and submitted to the competent authority.
Meanwhile, the Basel Committee will apply its prudent treatment standards for banks toward crypto assets starting January 1, 2025. The rules will cover all crypto assets except central bank digital currencies, whose treatment will be addressed as they are rolled out. Europe has begun testing a digital euro program, while Spain collaborates with local fintechs on related initiatives. The United Kingdom is examining the possible launch of a digital pound to gauge future use cases.
The move toward a digital euro in Spain aligns with Europe’s standing as a major hub for crypto-asset activity. In 2021, the region had a large volume of crypto transactions, but the 2022 FTX fallout triggered a notable contraction in the market. Despite brief declines, the regulatory push continues to shape how crypto assets interact with traditional finance across the euro area and beyond.
Notes and attributions: insights reflect national assessments and international coordination efforts reported by financial authorities and financial stability bodies.
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