Bank of Portugal Governor Advocates for Unified Crypto Regulation

Mário Centeno, the Governor of Banco de Portugal, has stressed the necessity for a collaborative international approach to create a comprehensive regulatory framework for cryptocurrencies.

Centeno highlighted the limitations of individual national efforts, emphasizing that they are inadequate in safeguarding investors due to the inherent global nature of digital assets, which could lead to regulatory discrepancies and openings for malevolent players.

Addressing attendees at the 2023 Banco de Portugal Financial Stability Conference on October 2, Centeno lauded the Markets in Crypto Asset (MiCA) rules. He criticized certain cryptocurrency offerings in light of recent market downturns, which resulted in significant financial losses.

Regarding MiCA, he commended the solid regulations in place and the drive of countries to ensure domestic adherence to the law’s stipulations.

Centeno, a staunch proponent of unified action, introduced the idea of “same risk same regulation,” bearing in mind the nascent state of the market.

“Today’s financial landscape is evolving at an increasingly rapid pace, driven by continuous innovation, greater reliance on digital platforms, and the emergence of mixed-activity groups. It would be short-sighted to believe that regulating and supervising these global risks and international players at the national level will suffice.”

He also highlighted the delicate act regulators face: instituting rigorous regulations without stifling market innovation.

In the broader context, other global regulatory figures have also vocalized the necessity for a standardized framework to facilitate collaborative legislative efforts. This year, the Prime Minister of India appealed to the G20 leaders to consider guidelines aligned with recommendations from the International Monetary Fund (IMF) and the Financial Stability Board (FSB).

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While acknowledging the advantages of crypto, such as affordability and global accessibility, Centeno also expressed concerns about the broader market.

Cryptocurrencies saw a surge in popularity during the COVID-19 era, reaching record highs. However, their durability has come into question due to the subsequent decline in values and certain project failures.

Prominent instances include the Terra network’s collapse and the notorious FTX debacle, which had severe repercussions for the global market.

“Crypto-assets and Decentralised Finance, or DeFi, exemplify this risk. While proponents of crypto and DeFi talk about the democratization of finance, it is not clear whether it will materialize, especially given the highly technical nature of this space.”

Centeno concluded by pointing out that the longevity of digital assets remains uncertain. Nonetheless, European regulators have been proactive, seeking to bridge the gap between conventional and decentralized finance (DeFi).