Spanish Lawmakers Want Cryptoassets to Carry ‘Traffic Light’ Risk Warnings

A group of Spanish lawmakers wants the country’s financial top regulator to force crypto to carry “traffic light”-style risk warnings.

The Spanish news agency EFE (via MSN ) reported that the Sumar group of MPs wants the National Securities Market Commission (CNMV) to use the system for retail investors.

The group says that the system would let users “clearly and visually” identify the type of asset they are purchasing.

Sumar has sent a written proposal to the regulator. The group complained that a “significant portion” of tokens traded on crypto exchange platforms “lack material backing or any underlying value.”

Traffic Light Crypto Warnings Coming to Spain?

The parliamentary group also wants to rename cryptoassets like Bitcoin (BTC) and Ethereum (ETH).

It proposes using terms like “crypto bets” or “unbacked assets.” The lawmakers justified their request by explaining that coins “do not grant their owners any rights to tangible assets or have any connection to productive activities.”

The traffic light warning system would see the CNMV apply one of three labels to each cryptoasset on an exchange or bank’s investing platform.

• The regulator would give a green light to cryptoassets that are registered, supported, and supervised. These coins would also need to demonstrate stable market performance.
• It would use yellow for cryptoassets that have “limited backing” or display moderate volatility.
• An orange light would identify “unsupervised” coins with high risk levels.
• And a final red label would be reserved for “speculative assets with no identified issuer or material backing.”

Crypto Concentrates Wealth, Say Lawmakers

Sumar said it is wary of “extreme forms of fictitious capital that do not generate value, but rather generate volatility, inequality, and wealth concentration.”

Carlos Martín Urriza, the Sumar spokesperson for Economy and Finance, said policymakers should protect retail investors from assets that are not backed by a verified asset or collateral.

He added that crypto trading is often more similar to betting than to investing. Furthermore, Sumar wants the CNMV to force banks and exchanges to ensure their customers read pre-purchase information on cryptoassets before allowing them to buy coins.

This should apply regardless of a token’s individual classification, Sumar said. It added that these mandatory warnings must be clearly summarized and contain visual elements.

Sumar suggested that the CNMV use prominent warning systems. It said the regulator should base its models on those already used in sectors such as gambling or tobacco sales.

Restrict Access to AI-powered Trading, MPs Urge

Sumar lawmakers also want to create specific regulations for algorithmic trading pools. And the group wants to restrict retail investors’ access to trading platforms that use AI or algorithms.

Sumar is a left-wing coalition comprising 20 parties that was first formed to run in the July 2023 general elections.

Although it does not have a representation in the Senate, it has 31 lawmakers in the lower house, the Congress of Deputies. It makes up one of the 11 political blocs in Prime Minister Pedro Sánchez’s ruling coalition.

This year has seen some of Spain’s largest banks move into the crypto sector as the popularity of coins continues to grow on the Iberian Peninsula.

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