Crypto and Defi Could Pose ‘Real Risks’ to Financial Stability – Regulation Bitcoin News

The president of the European Central Bank (ECB), Christine Lagarde, says crypto assets and decentralized finance (defi) have the potential to pose “real risks” to financial stability. She has some regulatory suggestions to supplement Europe’s Markets in Crypto Assets Regulation (MiCA) bill.

Lagarde’s Crypto Regulation

ECB President Christine Lagarde talked about cryptocurrency regulation at the European Parliament’s Committee on Economic and Monetary Affairs hearing Monday. She stated:

As we begin to investigate crypto assets, and their risk, we believe that decentralized finance (defi), and crypto assets have the potential of posing real 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 added.

However, she noted: “For the moment, the links between the private sector crypto assets and traditional finance remain still limited — for the moment.”

Lagarde then spoke about the Markets in Crypto Assets Regulation bill. She emphasized that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for quick adoption and implementation” of MiCA.

The chief of the ECB noted her satisfaction with MiCA’s achievements. However, she added that to her understanding, it “will not be implemented until 2024,” which she stressed “is a long way away.”

Lagarde offered some suggestions to add additional provisions to the MiCA bill. Referring to the MiCA bill with add-on provisions as MiCA2, she explained that MiCA2 “Should address the risk of interconnectedness with respect to financial institutions’ exposure to crypto assets.”

It should also “fully cover decentralized finance (defi)” and regulate crypto staking and lending activities, she said. Although the MiCA bill currently in effect does not include bitcoin, the ECB boss said that she hopes MiCA2 will.

Let us know what you think of Christine Lagarde’s comments. Please leave your comments below.

Kevin Helms

Kevin is a graduate of Austrian Economics. He discovered Bitcoin in 2011, and has been an advocate ever since. His main interests are in Bitcoin security, open source systems, network effects, cryptography, and intersections between economics, cryptography, and Cryptography.