Christine Lagarde (CEB President) says that crypto assets and decentralized financing (defi), have the potential to present “real risks” for financial stability. She offers some regulatory suggestions that will complement Europe’s Markets in Crypto Assets Regulations (MiCA).
Lagarde on Crypto Regulation
Christine Lagarde, President of the ECB, spoke Monday at the hearing of the European Parliament’s Committee on Economic and Monetary Affairs about cryptocurrency regulation. She stated:
As we begin to investigate crypto assets and their risk, we believe that decentralized finance (defi), and crypto assets have the potential to present real risks to financial stability.
“This would be especially true if the rapid growth in crypto-asset markets, services continues… and the interconnectedness both with the traditional financial sector is intensified,” said the ECB chief.
She noted, however, that the “for the moment, the connections between the private sector cryptocurrency assets and traditional financing remain limited — for now.”
Lagarde then spoke about the Markets in Crypto Assets Regulation bill. She stressed that the European Systemic Risk Board, which she chairs (ESRB), “supports rapid adoption and implementation of MiCA.”
The chief of the ECB noted that she was encouraged by MiCA’s progress. She stressed that it would not be implemented before 2024, which is her understanding.
Lagarde suggested additional provisions to the MiCA bill. She referred to the MiCA bill as MiCA2 and explained that MiCA2 “Should address interconnectedness in relation to financial institutions’ exposure crypto assets.”
She stated that it should “fully cover decentralized financing (defi)” as well as regulate crypto staking, lending and other activities. Although the MiCA bill currently in effect does not cover bitcoin, the ECB boss said that she hopes MiCA2 will.