Sunday, August 14

President of Spain’s CNMV points out the obvious about bitcoin

Key facts:
  • Rodrigo Buenaventura believes that cryptocurrency cannot “last as a currency” if it is volatile.

  • In addition to pointing out something already known, the official fell into conceptual errors about Bitcoin.

The president of the Spanish National Securities Market Commission, Rodrigo Buenaventura, assured that bitcoin (BTC) “will cease to be profitable” as a speculative asset if it is massively adopted as a payment method.

The official expressed himself that way in the Norbolsa Markets Forum 2021, carried out in Bilbao, Spain. In his speech, Buenaventura specified more specifically that “if a cryptocurrency is volatile and profitable, it will not last as a currency, and if it lasts, it will cease to be profitable.”

In this sense, he explained that “the triumph or consolidation of a cryptocurrency in the future, in terms of acceptance, will be inseparably associated with the stabilization of its value, which means that it will stop offering profitability and will start offering stability.”

These statements attract attention because they come from the highest representative of the CNMV, an entity from a country that does not yet regulate cryptocurrencies, but is actually something that the Bitcoiner community has always considered it almost obvious.

The equation indicates that, the greater the adoption of bitcoin, the less abrupt variations in its price will be. In this way, it will be easier to use it as a stable reference to value goods and services and, therefore, as a unit of account.

Other considerations of the CNMV of Spain on bitcoin

On the other hand, Buenaventura also called on Spanish investors to be cautious with “hidden” information on the risks of this type of asset. On the internet, “get-rich-quick” is often promoted, which is not really such, he said.

Likewise, the head of the CNMV assured that cryptocurrencies “lack a stream of payment flows that determine an intrinsic value.” According to his vision, that is why crypto assets are more like currencies than other financial instruments, although he clarifies that cryptocurrency deposits do not pay interest.

The latter is not entirely true, since there are non-banking entities that offer services with cryptocurrencies that include the payment of interest on your deposit. Likewise, there are decentralized finance platforms (DeFi) that also offer interest for depositing tokens in their smart contracts.

Continuing with the negatives you see in bitcoin and the other cryptocurrencies, Buenaventura stated that there are no guarantees that someone will not manipulate the market “With false transactions or information.”

About false information, referring, for example, to fake news that “inflate” the price of a cryptocurrency, it is something recurrent. However, with the “false transactions” also the official is wrong, given that he is omitting another one of the basic principles of Bitcoin, which is the immutable and unalterable quality of the blockchain. In other words, you cannot add “false” information to the blockchain and then simply subtract it.

Finally, Buenaventura dismissed the value of cryptocurrencies in terms of their ability to create value for investors long-term, except those that become means of payment accepted locally and internationally. Only an “infinitesimal” part has that capacity, he says.

This affirmed by the head of the CNMV can be denied just by looking at the evolution of the bitcoin price in recent years. As can be seen in the graph below, anyone who has invested in the cryptocurrency for the long term would have made a profit as of today.

Bitcoin has had fluctuations, but its price has always tended to rise in recent years. Source: CoinMarketCap.

Bitcoin as a unit of payment

The scenario that Rodrigo Buenaventura raises already has his first experiences in the field. While this is only one country on the entire world stage, El Salvador has already accepted cryptocurrency as legal tender, which is why it is already used in its territory for business transactions in everyday life.

As CriptoNoticias reported, Cuba also followed a similar line by recognizing payments with cryptocurrencies through your Central Bank. Although it is not as important a step as that of El Salvador, both situations will serve to have the first conclusions about the massive use of bitcoin as a unit of account.