Cryptocurrencies and Defi could pose ‘real risks’ to financial stability – Regulating Bitcoin News

European Central Bank (ECB) President Christine Lagarde said that crypto assets and decentralized finance (defi) have the potential to pose “real risks” to financial stability. She has some regulatory advice to complement Europe’s Markets in Crypto Assets Regulation (MiCA) Act.

Lagarde on cryptocurrency regulation

European Central Bank President Christine Lagarde spoke about cryptocurrency regulation during a hearing of the European Parliament’s Committee on Economic and Monetary Affairs on Monday. she says:

We believe that cryptoassets and decentralized finance (defi) have the potential to pose real risks to financial stability as we embark on our work on cryptoassets and the risks they pose.

The ECB president added: “This is especially true if crypto-asset markets and services continue to grow rapidly…and if interconnectedness with the traditional financial sector and the wider economy is strengthened.”

However, she noted: “Currently, the connection between private sector cryptoassets and traditional finance remains limited — for now.”

Lagarde went on to talk about the Markets Regulation in Crypto Assets (MiCA) Act. She stressed that the European Systemic Risk Board (ESRB), of which she chairs, “supports the need for rapid adoption and implementation of MiCA”.

The ECB president noted that she was encouraged by the progress of the MiCA. However, she added that, as far as she knew, “it will not be implemented until 2024”, stressing that “there is still a long way to go”.

Lagarde then proposed some additional provisions to the current MiCA bill. Referring to the MiCA Act with additional provisions as MiCA2, she explained that MiCA2 “should address the interconnected risks of financial institutions’ exposure to cryptoassets.”

It should also “fully cover decentralized finance (defi)” and regulate crypto staking and lending activities, she said. The ECB president noted that the current MiCA Act does not cover Bitcoin, but she hopes MiCA2 will cover it.

What do you think of ECB President Christine Lagarde’s remarks? Let us know in the comments section below.

Kevin Helms

As an Austrian economics student, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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