European Central Bank (ECB) President Christine Lagarde said that crypto assets and decentralized finance (DeFi) have the potential to pose a “real risk” to financial stability. It has some regulatory suggestions to complement Europe’s markets in the Crypto Assets Regulation (MiCA) bill.
Lagarde on Crypto Regulation
ECB President Christine Lagarde spoke about cryptocurrency regulation at a hearing of the European Parliament’s Committee on Economic and Monetary Affairs on Monday. He said:
We believe that crypto assets and decentralized finance (DFI) have the potential to pose a real risk to financial stability as we begin this work relating to crypto assets and the risk posed by them.
“This will be particularly the case if the rapid growth of crypto-asset markets and services continues … and the interconnectedness with both the traditional financial sector and the broader economy intensifies,” the ECB chief said.
However, she added: “At the moment, the relationship between private sector crypto assets and traditional finance is still limited – for the time being.”
Lagarde spoke about the Markets in Crypto Assets Regulation (MiCA) bill. She stressed that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for rapid adoption and implementation” of MICA.
The ECB chief said he was excited by Mika’s progress. However, she said that in her understanding, it “won’t be implemented until 2024,” which she insisted “has a long way to go.”
Lagarde then suggested some additional provisions in the existing MICA bill. Referring to the MiCA bill with add-on provisions as MiCA2, it explained that MiCA2 should “address the risk of interconnectedness in relation to the exposure of financial institutions to crypto assets.”
It “completely covers decentralized finance (DeFi)” and regulates cryptocurrency and lending activities, she said. The ECB boss said that bitcoin is not included in the current MiCA bill, but he expects it to be included in the MiCA2.
What do you think of ECB President Christine Lagarde’s comments? Let us know in the comments section below.
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