Tuesday, March 21

Botín calls for traditional banking to compete with cryptocurrencies

The president of Banco Santander, Ana Botín, defended this Wednesday in an interview published by the supervisory bulletin of the European Central Bank, the participation of traditional banks in the cryptoactive market. “It is necessary to allow banks to be part of the development of crypto asset markets,” she said. The chief executive of the largest Spanish bank argues that entities should be allowed to offer these products and services to their clients.

“Crypto assets open up possibilities in terms of payments, transaction costs, scale and agility,” defends Botín in the interview in a publication of the European financial supervisor, which in the past has shown its reluctance with these assets and is preparing to launch its own digital euro. In fact, the president of Santander acknowledges that crypto assets “also create new challenges for banks and authorities in terms of equal conditions, systemic risk and transparency.”

Just a few weeks ago, Botín was more cautious about the participation of banks in this business. “Banks already use the technology used by cryptocurrencies, but with all the regulation and guarantees of trust,” he assured after the presentation of the entity’s results for the 2021 financial year.

Now, Botín advocates for a regulatory change that allows banks to compete in these new digital environments. “A strong regulatory regime for crypto assets in the EU is essential to ensure a competitive financial ecosystem in which all players are subject to the same rules,” he notes in the interview with the ECB. “A harmonized European regulatory framework that is technologically neutral and innovation-friendly protects users and provides a level playing field through the principle of “same activity, same risks, same rules, same supervision”, he emphasizes. Botín connects this issue with his traditional claim that banking can compete with “the same rules” as the big technology and fintech companies in the financial sector. “I would say that banks welcome competition in digital finance, as long as that competition is fair and benefits society,” he argues.

The executive clarifies, yes, that the participation of banks in the cryptoactive market and the offer of these services to their clients must be carried out with “the highest standards of compliance and risk management.” Botín links this debate with the launch of central bank digital currencies, such as the digital euro being prepared by the ECB. “Given its potentially far-reaching impact on financial stability and the entire financial ecosystem, European banks are eager to be part of the ECB project and should be fully involved in it,” he says. “The aim is to ensure that, if a digital euro is launched, it benefits European citizens, while safeguarding European financial stability and allowing the payments industry to flourish,” he adds.

The same day this interview is published, the Financial Sustainability Forum (FSB), which brings together supervisors from around the world, warned of the risks of the cryptocurrency market for the financial system. Specifically, it has warned that crypto assets are approaching a point where they can pose a real threat to global financial stability, according to a report published this Wednesday. Crypto asset markets are evolving rapidly and could reach a point where they pose a threat to global financial stability due to their scale, structural vulnerabilities and increased interconnectivity with the traditional financial system.

The market capitalization of all crypto assets multiplied by 3.5 times during 2021, reaching a total volume of 2.6 trillion dollars (2.28 trillion euros). Although this figure represents a small part of the global financial system, the Council has warned of the increasing direct connections between these assets and some systemically important financial institutions.

Specifically, the supervisor has warned against decentralized finance platforms (DeFi, for its acronym in English), which has become a rapidly emerging sector and provides financial services using crypto assets and other ‘stablecoins’. Some of these platforms operate outside the regulatory perimeter of a jurisdiction or do not comply with applicable laws and regulations.