Christine Lagarde, president of the European Central Bank, says crypto assets and decentralized finance (a challenge) have the potential to pose “real risks” to financial stability. It has some regulatory proposals to complement the European Markets Act in the Crypto Asset Regulatory Act (MiCA).
Lagarde regulates encryption
European Central Bank President Christine Lagarde spoke about cryptocurrency regulation at the European Parliament’s Committee on Economic and Monetary Affairs hearing on Monday. She said:
We believe, as we begin this work on crypto assets and the risks they pose, that crypto assets and decentralized finance (the challenge) have the potential to pose real risks to financial stability.
“This will be particularly the case if the rapid growth of crypto-asset markets and services continues… and the interconnection with both the traditional financial sector and the broader economy intensifies,” the ECB president added.
However, she noted, “For now, the connections between private sector crypto assets and traditional finance are still limited — for now.”
Lagarde proceeded to talk about the Markets Crypto Asset Regulatory Act (MiCA). She emphasized that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for rapid adoption and implementation” of MiCA.
The European Central Bank chief indicated that she is encouraged by the progress made at MiCA. But she added, in her understanding, that “it will not be implemented until 2024”, and stressed that it is “a long way off”.
Lagarde then proposed some additional provisions for the current MiCA bill. Referring to the MiCA bill with additional provisions such as MiCA2, it explained that MiCA2 “must address interconnection risks in relation to financial institutions’ exposure to crypto assets.”
She said it should also “completely cover decentralized finance (the challenge)” and regulate cryptocurrency borrowing. The ECB chief notes that the current MiCA bill does not cover bitcoin but hopes that it will be covered in MiCA2.
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