- The Bank of Spain is initiating plans for its CBDC and welcomed tech and financial service providers for proposals.
- The initiative aims to simulate wholesale transactions using the CBDC.
- The bank’s top executives were vocally opposed to cryptocurrency in the past.
- Further, regulators like CNMV have opposed cryptocurrency promotion.
There has been a recent influx of Central Bank Digital Currencies (CBDCs), and the Bank of Spain has taken a decisive step to join the trend. Like many Apex financial institutions across the globe, the Bank of Spain is working on launching its own CBDC.
Recently, the bank appealed to tech and financial service providers to submit their proposal for the project by January 31, 2023. The request will lay the foundation for the CBDC plans.
Furthermore, the initiative intends to virtually test the possible usage of the CBDC in wholesale transactions. Wholesale transactions in this context refer to the use of the CBDC to transfer funds between banks and other financial institutions.
Notably, the Bank of Spain emphasized that its recent attempt at launching a CBDC differs from the ongoing research of the European Union on a retail virtual Euro.
Opposition to Cryptocurrency by the Bank of Spain
In the past, top executives from the Bank of Spain were vocal in their opposition to cryptocurrency. Early this year, Deputy Governor Margarita Delgado criticized the increasing use of cryptocurrency in the country.
The Deputy Governor pointed out that cryptocurrency users in the country are not well informed about cryptocurrency and cited how virtual assets can be used for illegal purposes, such as financing terrorism and money laundering.
She called for proper regulation and education about the industry’s opportunities, harm, and impact. She added that the growth of cryptocurrency in Spain could harm the country’s existing financial system.
The oppositional posture of the Bank of Spain also extended to banks offering cryptocurrency services to their customers. In a separate interview, the Governor of the Bank of Spain, Pablo Hernández de Cos, talked about the dangers in the virtual assets sector and called for a closer look into the activities within the space.
Ban on Cryptocurrency-related Promotions by Influencers in Spain
Other regulators like the National Securities Market Commission (CNMV) in the country have shown their displeasure at cryptocurrency promotion. Consequently, the CNMV restricted the use of influencers by cryptocurrency firms to promote their services. The development emanated following the promotion of Binance by World Cup-winning football legend Andres Iniesta.
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Hola,@andresiniesta8, los criptoactivos, al ser productos no regulados, tienen algunos riesgos relevantes. Es recomendable leer el comunicado de@CNMV_MEDIOS del 9/2/2021 https://t.co/SWRF73xEJj e informarse a fondo antes de invertir en ellos o de recomendar a otros que lo hagan— CNMV (@CNMV_MEDIOS) November 24, 2021
On the Flipside
- CBDCs can facilitate adopting a reliable sovereign-backed domestic payment and settlement system that partially replaces paper currency. However, in the long run, if depositors move their funds from commercial banks to CBDC holdings rapidly, they may lose significant funding.
Why You Should Care
Besides Spain, countries like Nigeria and India are already embracing CBDCs. CBDCs are therefore flourishing worldwide in the middle of a bearish crypto market.
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