European Central Bank (ECB) President Christine Lagarde says crypto assets and decentralized finance (defi) could pose “real risks” to financial stability. She has several regulatory proposals to complement the European crypto asset regulation (MiCA) bill.
Lagarde on crypto regulation
ECB President Christine Lagarde spoke about cryptocurrency regulation at a hearing of the European Parliament’s Economic and Monetary Affairs Committee on Monday. She said.
As we embark on this work on crypto assets and the risks they pose, we believe that crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability.
“The rapid growth of crypto asset markets and services continues to ……
“This will be especially so if the interconnections with both the traditional financial sector and the broader economy are strengthened,” the ECB chief added.
However, she noted.” For now, the link between private sector crypto assets and traditional finance remains limited.”
Lagarde proceeded to talk about the crypto asset regulation (MiCA) bill. She emphasized that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for the swift adoption and implementation” of MiCA.
The ECB President noted that she is encouraged by the progress made on MiCA. However, she added that, in her understanding, “it will not be implemented until 2024,” and stressed that “it is a long way to go.”
Lagarde then proposed several additional provisions to the current MiCA bill. Calling the MiCA bill with the additional provisions MiCA2, she explained that MiCA2 “should address interconnection risks related to financial institutions’ exposure to crypto assets.”
It should also “fully cover decentralized finance (defi)” and regulate crypto wagering and lending activities, she said; the ECB boss noted that the current MiCA bill does not cover bitcoin, which she hopes will be covered by MiCA2.
Image credits: Shutterstock, Pixabay, Wiki Commons