The president of the European Central Bank (ECB), Christine Lagarde, states crypto possessions and decentralized finance (defi) have the capacity to pose “real risks” to financial stability. She has some regulative recommendations to supplement Europe’s Markets in Crypto Assets Regulation (MiCA) expense.
Lagarde on Crypto Regulation
ECB President Christine Lagarde discussed cryptocurrency regulation at the European Parliament’s Committee on Economic and Monetary Affairs hearing Monday. She stated:
We think, as we are starting this work worrying crypto possessions and the danger that they pose, that crypto possessions and decentralized finance (defi) have the capacity to pose genuine threats to financial stability.
“This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified,” the ECB chief included.
However, she kept in mind: “For the moment, the links between the private sector crypto assets and traditional finance remain still limited — for the moment.”
Lagarde continued to discuss the Markets in Crypto Assets Regulation (MiCA) expense. She highlighted that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for quick adoption and implementation” of MiCA.
The ECB chief kept in mind that she is motivated by the development of MiCA. However, she included that to her understanding, it “will not be implemented until 2024,” which she worried “is a long way away.”
Lagarde then recommended some extra arrangements to the present MiCA expense. Referring to the MiCA expense with add-on arrangements as MiCA2, she discussed that MiCA2 “Should address the risk of interconnectedness with respect to financial institutions’ exposure to crypto assets.”
It must likewise “fully cover decentralized finance (defi)” and manage crypto staking and loaning activities, she stated. The ECB manager kept in mind that the present MiCA expense does not cover bitcoin however she hopes it will be covered in MiCA2.
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